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Railroad   Rates. 


ARGUMENT 

<  ii 

J.  H.  Benton,  Jr., 
Massachusetts   Railroad    Commission 


on  petition  for  reduction  in 
coal  rates  to  brockton. 


June  29,  1 90 1. 


B<  l 
ADIMS  (ETCHELL,  LAW  PRI 

kli.v  Street. 
1901. 


/ 


Ah^/&3(z 


1  7 


INDEX. 


•  Page 
Acworth,  W.  M.,  Government  Interference  in  .English  Rail- 
way Management 51 

Adams,  Charles  Francis,  The  Railroad  Problem      ...  41 
Adams,  Prof.  Henry   C,  Statistician   Interstate   Commerce 

Commission         .........  KO 


From  J.   H.   BENTON,  Jr., 

Ames   Building.    Boston, 


Competitive  rates,  lmisiraiiuns  ui     .  -. : .          .          .  /y 

Constitutionality  of  Massachusetts  law  as  to  revision  of  fares 

and  freights 4 

Cost  of  service  cannot  be  ascertained 24  et  seq. 

Cullom  Congressional  Committee  Report        ....  49 
Dabney,  W.  D.,  Discussion  of  Rate  Question.     (Public  Reg. 

of  Railways,  pp.  97,  98) 44 

Distances  as  affecting  rates ">34 

Dixon,  Prof.,  State  Railroad  Control 42 

Eaton,  J.  Shirley,  Railroad  Operation 45.  46 

Eminent   Domain,   Commonwealth    may  take   railroads    by 

right  of 3 

English  Parliamentary  Commission  on  Railway  Amalgama- 
tion Report 40 

English  Parliamentary  Commissioners,  Statement  to  Parlia- 
ment     53 

Excessive  rate  defined  by  Massachusetts  commissioners           .  9,  13,  15 
Expenses  of  freight  and  passenger  business  cannot  be  separated  33 
Fares  and  freights  in  Massachusetts,  Original  theory  of  regu- 
lation             2 


Ah=z  /£3  (^ 


-StU. 


<5L^>w>?tcc^ 


INDEX. 
_* 

Page 

Acworth,  W.  M.,  Government  Interference  in  .English  Rail- 
way Management 51 

Adams,  Charles  Francis,  The  Railroad  Problem      ...  41 
Adams,  Prof.  Henry   C,  Statistician   Interstate   Commerce 

Commission        .........  50 

Alexander,  E.  P 49 

Boston  &  Lowell  Railroad,  Act  to  incorporate          ...  2 

Boston  &  Worcester  Railroad,  Act  to  incorporate    ...  2 

Chanute,  Octave,  Investigation  by 32 

Coal  business  to  Brockton %  67 

Coal  consumption  not  influenced  by  rate          ....  70 

Coal  rates  on  New  Haven 78 

Coal  rates  on  Boston  &  Maine,  Central  Vermont,  and  Boston 

&  Albany  roads            . 76-78 

Coal  rates  reduction  on  New  Haven  lines          ....  82 

Coal  transportation,  Character  of,  on  New  Haven  -Road          .  85 

Cohn,  Prof.,  Die   Englische  Eisenbahnpolitic          ...  43 

Competitive  rates,  Illustrations  of 79 

Constitutionality  of  Massachusetts  law  as  to  revision  of  fares 

and  freights         .........  4 

Cost  of  service  cannot  be  ascertained        .         .         .         .  24  et  seg. 

Cullom  Congressional  Committee  Report        ....  49 

Dabney,  W.  D.,  Discussion  of  Rate  Question.     (Public  Reg. 

of  Railways,  pp.  97,  98) 44 

Distances  as  affecting  rates 11,  34 

Dixon,  Prof.,  State  Railroad  Control 42 

Eaton,  J.  Shirley,  Railroad  Operation      .....  45,  46 
Eminent   Domain,   Commonwealth    may  take   railroads    by 

right  of 3 

English  Parliamentary  Commission  on  Railway  Amalgama- 
tion Report          .........  40 

English  Parliamentary  Commissioners,  Statement  to  Parlia- 
ment     53 

Excessive  rate  defined  by  Massachusetts  commissioners           .         9,  13,  15 
Expenses  of  freight  and  passenger  business  cannot  be  separated  33 
Fares  and  freights  in  Massachusetts,  Original  theory  of  regu- 
lation            .          .          ,          ,          , 2 


11 


INDEX. 


Mas 


1900 


Fink,  Albert,  Statement  of 

Fixing  rates  under  a  special  statute  .         . 

Fluctuations  in  coal  transportation  ..... 

Fourth  Annual  Report  Interstate  Commerce  Commission 

General  Statutes  of  Massachusetts,  i860,  Regulation  of  fares 
and  freights  by    . 

Grade  crossings,  Expense  of  abolition  in  Brockton 

Grade  crossings,  Expense  of  abolition  by  New  Haven  in 
sachusetts    ........ 

Grierson  on  English  and  foreign  railway  rates 

Hadley,  Prof.,  Railroad  Transportation  . 

Hendrick,  Frank,  Railway  Control  by  Commissioners, 

Hepburn  Committee,  The,  Statement  from  Report  of 

Hudson,  J.  F.,  The  Railways  and  the  Republic 

Hunter,  Railway  Rates,  1889 

Interstate  Commerce  Commission  on  general  principle  that 
owners  of  railroads  should  be  left  free  to  construct,  own, 
and  manage  railroads  ....... 

Interstate  Commerce  Commission  v.  Cincinnati,  &c,  Railway, 
167  U.S.  Rep.  479,  &c 

Kirkman,  Railway  Accounts,  vol.  1,  p.  305      .         .         .         . 

Kirkman,  Addresses  before  World's  Railway  Commerce  Con- 
gress   ........... 

Larrabee,  William,  Railroad  Question  (railway  rates  discussed 
from  granger  standpoint) 

Le  Rossignol,  Prof.,  Monopolies  Past  and  Present  (1901) 

Newcomb,  H.  F.,  Report  of  Industrial  Commission  (1900)    . 

Nimmo,  Joseph,  Jr.,  The  Railroads  as  One  System 

Operation  of  passenger  department  separate  from  freight  de- 
partment, Railroad  Commissioners'  Report,  1873     . 

Parliamentary  regulation  of  railway  rates         .... 

Power  to  fix  rates  not  given  to  commissioner  in  Massachusetts 

Public  Statutes  of  Massachusetts,  1880,  Regulation  of  fares 
and  freights  by    ........ 

Purchase  of  railroads,  Right  of  commonwealth  to  purchase    . 

Railway  Commissioners  of  Maine,  Report  of  1874 

Rates  to  be  fixed  by  the  directors       ...... 

Reduction  in  rates  in  Massachusetts 

Reduction  in  coal  rate  to  Brockton  group         .... 

Revised  Statutes  of  Massachusetts,  1836,  Regulation  of  fares 
and  freights  by 

Revision  of  fares  and  freights  by  legislature,  Acts  of  1870  and 
1874 

Sanford,  John  E.,  Statement  as  to  impossibility  of  separating 
expenses  of  passenger  and  freight  business 

Sax,  Prof.,  As  to  Joint  Cost 


36,  37.  38 
15 

88 

36 

3 
60 

9i 
38,  39 
48 
56 
46>  47 
47 
40 


5i 

56 
43 

53 

49 
56 

42 

55 

34-  35 
40 

14 

3 

2 

54 

16 

17,  18 

65 


33 

43 


INDEX.  Ill 

Schoonmnker,  Compendium  of  Transportation  Theories,  Ken- 
sington Series     .........  55 

Seligman,  Prof.  Edwin  K.  A.,  Railway  Tariffs  ;uul  the  Inter- 
state Commerce  Law 48 

Special  rate  in  Brockton    ........  61 

Standard  of  reasonable  rate  as  defined  by  Massachusetts  Rail- 
road Commissioners  .         .         .         .         .         .         .         .   6,  7,  et  seq. 

Stickney,  A.  B.,  The  Railway  Problem 43 

Superintendents  of  various  roads  in  commonwealth  on  cost 

of  freight  traffic,  Railroad  Commissioners'  Report,  1873  .  33 
Taussig,  Prof.  F.  W.,  Statement  of           .....              41,  42 

Van  Oss,  American  Railroads  as  Investments           ...  56 
Walker,  Aldace  F.,  Amendment  of  the  Interstate  Commerce 

Law    ...........  52 


Mr.   Chairman 

and  Gentlemen  of  the  Commission: 

The  petition  in  this  case  alleges  that  the  existing  rate  of 
seventy-five  cents  a  ton  for  the  carriage  of  coal  from  tide 
water  to  Brockton  is  "  an  excessive "  rate,  and  that  fifty 
cents  is  a  reasonable  rate  for  such  carriage.  The  peti- 
tioners have  introduced  no  evidence  to  show  that  the  exist- 
ing rate  is  excessive  as  compared  with  other  rates  for  simi- 
lar service,  nor  have  they  attempted  to  show  that,  upon 
comparison  with  other  and  general  coal  rates  in  the  state, 
the  rate  is  excessive.  They  have  claimed,  and  their  evi- 
dence has  been  wholly  directed  to  show,  that  the  existing 
rate  is  excessive  in  itself  as  compared  with  the  cost  of 
the  service,  and  have  claimed,  without  any  evidence  so  far 
as  I  remember,  that  the  general  freight  rates  of  the  com- 
pany are  higher  than  they  ought  to  be. 

The  petitioners  seem  to  think  that  the  board,  in  consider- 
ing the  question  of  whether  a  rate  for  transportation  is  ex- 
cessive, have  power  to  go  beyond  a  comparison  of  that 
rate  with  other  rates  for  similar  services  in  the  state,  and 
although  the  rate  may  not  be  found  to  be  excessive  as  com- 
pared with  other  rates,  still  adjudge  it  to  be  excessive  in  it- 
self upon  other  grounds.  It  is  obvious  that  this  view  rests 
upon  the  proposition  that  the  duty  has  been  imposed  upon 
the  board  to  revise  and  fix  rates  for  railroad  transportation. 
I  believe  this  view  to  be  based  upon  a  misapprehension  of 
the  law,  and  to  be  unsound  in  fact.  I  do  not  understand 
that  the  commissioners  are  required  by  law  to  revise,  or  can 
in  fact  revise  and  alter  the  existing  tariffs  of  the  railroad 


companies.  This  question  which  thus  arises  between  the 
petitioners  and  the  company  is  fundamental.  It  seems, 
therefore,  proper  to  examine  it  before  taking  up  the  facts 
of  the  case  itself.  It  is  also  obviously  a  most  important 
question,  and  I  shall  therefore  examine  it  at  some  length. 

The  original  theory  of  the  regulation  of  fares  and  freights 
by  railroads  in  Massachusetts  was  a  revision  of  them  with- 
in the  limit  of  a  return  of  10  per  cent  upon  the  capital 
invested.  This  was  provided  for  at  first  in  the  charter  of 
each  company,  the  provisions  varying  somewhat  in  the 
different  charters.     See  — 

Act  to  incorporate  the  Boston  &  Lowell  Railroad 
Corporation,  Laws  1830,  c.  4,  sec.  5* 

Act  to  incorporate  the  Boston  &  Worcester  Cor- 
poration, Laws  1831,  c.  72,  sec.  5- 

In  1836  this  provision  was  embodied  in  the  general  law 
as  section  83,  chapter  39,  Revised  Statutes.  This  provided 
that  the  corporations  might  establish  tolls  upon  passengers 
and  property  at  such  rates  as  might  be  determined  by  the 
directors,  but  that  the  legislature  might  from  time  to  time, 
as  they  should  deem  expedient,  alter  or  reduce  such  rates 
of  toll  according  to  the  provisions,  if  any,  contained  in  the 
charters  of  such  corporations,  provided  that  the  tolls  should 
not,  without  the  consent  of  the  corporation,  be  so  reduced 
as  to  produce  less  than  10  per  cent  per  annum  return.  At 
the  same  time  the  legislature  provided  that  the  common- 
wealth might  at  any  time  after  twenty  years  from  the  open- 
ing of  a  railroad  for  use  purchase  the  railroad  by  paying 
the  corporation  the  amount  of  capital  paid  in,  with  a  net 
profit  thereon  of  10  per  cent  per  annum  from  the  time  of  its 
payment  by  the  stockholders. 

Rev.  Sts.  c.  39,  sec.  84. 


3 


In  i860  these  provisions  were  re-enacted  as  sections  112 
and  138,  chapter  63,  General  Statutes. 

In  1870  the  legislature  repealed  section  112,  chapter  63, 
General  Statutes,  and  provided  that  railroad  corporations 
might  establish  fares,  tolls,  and  charges  at  rates  determined 
by  their  directors,  but  that  such  rates  should  be  at  all  times 
subject  to  revision  and  alteration  by  the  legislature,  or  such 
officers  or  persons  as  it  might  appoint  for  the  purpose, 
anything  in  the  charter  of  any  railroad  corporation  to  the 
contrary  notwithstanding. 

Laws  1870,  c.  325,  sec.  1. 

Section  2  of  the  same  act  also  provided  that  the  common- 
wealth might  at  any  time  after  one  year's  notice  to  a  rail- 
road corporation  take  the  road,  franchise,  and  other  prop- 
erty of  the  corporation  by  the  right  of  eminent  domain, 
paying  such  compensation  as  might  be  awarded  by  com- 
missioners, and,  if  the  corporation  was  aggrieved  by  the 
award  of  the  commissioners,  assessed  by  a  jury  in  the 
county  of  Suffolk.  In  the  codification  of  the  general  rail- 
road laws  of  the  commonwealth  in  1874,  tne  legislature 
re-enacted  this  provision,  asserting  its  right  to  regulate 
tolls,  notwithstanding  the  provisions  of  the  charters  of  the 
railroads. 

Laws  1874,  c-  372>  sec-  4- 

And  in  1880  these  provisions  were  re-enacted  in  Public 
Statutes,  chapter  112,  sections  3,  180. 

Whether  these  provisions,  by  which  the  legislature  at- 
tempted to  repeal  the  special  provisions  of  the  early  rail- 
road charters,  limiting  the  right  of  the  legislature  to  reduce 
fares  or  tolls  so  as  to  produce  annually  less  than  10  per 


cent  of  the  cost  of  the  roads,  was  within  the  power  of  the 
legislature,  has  not  been  decided  by  the  Supreme  Court. 

Attorney    General  v.    Old    Colony  Railroad, 
160  Mass.  62,  84. 

If,  however,  we  assume  that  the  legislature  could  thus  re- 
peal the  provisions  of  the  railroad  charters,  and  regulate  at 
its  discretion  all  tariffs  of  fares  and  freights  on  the  several 
railroads  of  the  commonwealth,  although  they  might  there- 
by reduce  the  net  earnings  below  10  per  cent  upon  the 
cost,  we  find  that  in  187 1  the  railroad  commissioners  in  their 
report,  after  a  careful  consideration  of  the  subject,  said  that 
they  were  unable  to  see  how  any  satisfactory  results  could 
be  arrived  at  through  such  action.  They  said  all  legisla- 
tion in  the  direction  indicated  — 

"must  be  either  general  or  special, —  general  as  ap- 
plying  to  all  the  railroads  of  the  Commonwealth,  or 
special  as  applying  to  some  individual  one  of  them. 
No  general  law  of  this  nature  has  yet  been  framed  ad- 
equate to  meet  the  wants  of  the  case,  though  attempts 
at  it  have  frequently  been  made;  nor,  indeed,  do  the 
Commissioners  now  see  how  such  a  law  could  be 
framed.  Not  that  it  is  here  meant  to  imply  that  the 
regulation  of  railroads  by  law  is  impracticable,  but  the 
doubt  is  confined  to  their  regulation  in  this  particular 
way.  Other  methods  have  been,  and  hereafter  will  be 
suggested,  and  the  practical  methods  can  only  be  as- 
certained after  trial ;  this  method  has,  however,  re- 
peatedly been  tried,  and  with  uniform  result.  ...  A 
general  law  regulating  fares  and  freights,  which  would 
very  slightly  touch  one  road,  would  inevitably  ruin 
another.     A  tariff  which  would  apply  to  one  class  of 


articles,  would  be  simply  ridiculous  when  applied  to 
another.  ...  It  is  useless  to  discuss  this  question  ; 
—  a  general  law  which  shall  meet  the  circumstances 
of  all  the  separate  roads  and  provide  for  all  classes  of 
freights,  degrees  of  speed  and  arrangements  for  com- 
fort is  a  practical  impossibility.  It  may,  however,  be 
urged  that  the  law  of  1870  was  intended  to  pave  a  way 
for  special  legislation  to  meet  individual  cases.  This 
is  very  probably  the  case  ;  —  at  the  same  time  should 
the  legislature  undertake  to  follow  out  the  plan  indi- 
cated, and  to  specifically  regulate  the  tariffs  of  each 
railroad  of  the  Commonwealth,  according  to  its  parti- 
cular circumstances  or  the  needs  of  its  surrounding 
community,  it  will  launch  itself  into  an  ocean  of  spe- 
cial legislation  such  as  has  never  yet  been  attempted, 
and  no  large  legislative  body  could  successfully  attend 
to.  Should  it  delegate  a  power  in  this  regard  to  the 
present  or  any  other  board  of  commissioners,  it  would 
simpty  destroy  it  by  so  doing.  A  responsibility  would 
be  imposed  unsustained  by  any  executive  power.  An 
authority  to  regulate  fares  and  freights  over  roads 
owned,  controlled  and  operated  by  others,  would  place 
those  in  whom  such  authority  was  reposed  in  an  en- 
tirely false  and  impossible  position." 

R.R.  Comrs.  Report,  1871,  pp.  58,  59. 

This  declaration  of  the  commissioners  was  made  in  view 
of  the  provisions  of  the  act  establishing  the  commission, 
chapter  408,  Laws  1869;  and  especially  with  reference  to 
the  duty  imposed  upon  the  commissioners  by  section  3  of 
that  act,  in  respect  to  informing  railroad  corporations  of 
changes  in  rates  which  the  commissioners  might  deem  to 
be  reasonable.     The  provision  of  that  section  with  regard 


6 


to  rates  is  now  to  be  found  in  section  16,  chapter  112,  Pub. 
Sts.,  and  has  not  been  changed  since  its  enactment  in  1869. 
It  is  as  follows  :  — 

"The  board  whenever  it  deems  that  repairs  are 
necessary  upon  any  railroad,  or  that  an  addition  to  its 
rolling  stock  or  an  addition  to  or  change  of  its  stations 
or  station  houses,  or  a  change  in  its  rates  of  fares  for 
transporting  freight  or  passengers  or  in  the  mode  of 
operating  its  road  and  conducting  its  business,  is  rea- 
sonable and  expedient  in  order  to  promote  the  security, 
convenience  and  accommodation  of  the  public,  shall  in 
writing  inform  the  corporation  of  the  improvements  and 
changes  which  it  considers  to  be  proper ;  and  a  report 
of  the  proceeding  shall  be  included  in  the  annual  re- 
port of  the  board." 

The  first  case  that  arose  before  the  commission  under 
this  section  is  found  in  the  appendix  to  their  report  for 
1871. 

It  was  on  the  complaint  of  the  selectmen  of  Freetown 
concerning  rates  of  freight  on  cord  wood  on  the  New  Bed- 
ford and  Taunton  railroad.  The  commissioners  had  then 
to'consider  and  definitely  state  the  ground  on  which  under 
the  law  they  considered  it  was  competent  for  them  to  take 
any  action  as  to  the  rates  of  fares  or  freight.  They  stated 
it  in  this  language  : 

"  In  order  to  justify  any  action  on  the  part  of  this 
Board  it  was  necessary  for  the  petitioners  to  prove  at 
least  one  of  three  propositions,  — 

"1.  That  the  charges  of  the  New  Bedford  and 
Taunton  Railroad  Company  for  the  transportation  of 
cord-wood  were  excessive  as  compared  with  those  of 
other  companies ;  or 


"  2.  That  they  were  excessive  as  compared  with  the 
charges  for  other  commodities  of  like  bulk  and  weight 
as  transported  by  themselves  ;  or 

"3.  That  the  New  Bedford  and  Taunton  Railroad 
could  for  exceptional  reasons  transport  with  a  fair 
profit  to  themselves  cord-wood  at  unusually  low 
freights." 

That  is,  the  commissioners  construed  the  law  giving 
them  authority  with  regard  to  fares  and  freights  to  author- 
ize them  to  deal  only  with  the  question  whether  a  fare  or  a 
freight  was  excessive,  — 

1  st.  As  compared  with  a  similar  charge  by  other  com- 
panies in  Massachusetts ;  or  — 

2d.  As  compared  with  charges  by  the  same  company  for 
similar  service  ;  or  — 

3d.,  Whether  for  exceptional  reasons  a  particular  service 
could  be  performed  by  any  railroad  at  an  unusually  low 
rate. 

In  other  words,  they  refused  to  attempt  to  revise  the 
entire  tariff  of  the  railroad.  They  assumed  that  the  tariffs 
on  railroads  were  on  the  whole  reasonable,  and  confined 
their  duty  to  ascertaining  whether  any  particular  rate  for 
passengers  or  freight  was  excessive  as  compared  with  other 
rates,  or  whether  in  an  exceptional  case  a  profit  could  be 
made  upon  the  particular  class  of  freight  or  passengers  by 
an  unusually  low  rate. 

They  then  proceeded  in  that  case  by  a  table,  which  is 
printed  in  their  opinion,  to  compare  the  freights  for  cord 
wood  on  other  roads  with  the  rates  on  the  Taunton  and 
New  Bedford,  and  found  that  the  rate  on  the  New  Bedford 
was  $1.50  as  against  $1.37,  on  the  average,  on  six  other 
roads,  and  they  decided  that  — 


8 


"The  petitioners  have  failed  to  establish  any  proof 
of  excessive  charges  against  the  corporation  respon- 
dent, as  compared  with  other  roads  of  the  Common- 
wealth." 

They  then  proceeded  to  compare  the  rates  on  cord  wood 
with  the  rate  charged  for  the  transportation  of  other  articles 
of  similar  bulk  and  weight  by  the  Taunton  and  New  Bed- 
ford road.  This  they  did  by  a  table,  which  is  printed  in 
their  opinion,  and  they  decided  that  — 

"from  this  comparison  it  does  not  appear  that  the 
petitioners  have  established  the  existence  of  any  ex- 
cessive charge  for  the  transportation  of  wood  as  com- 
pared with  the  average  of  similar  articles  specified  on 
the  tariff  of  the  company." 

The  commissioners  then  proceeded  to  consider  whether 
any  exceptional  reason  existed  why  the  railroad  should 
transport  cord  wood  at  unusually  low  rates,  and  decided 
that  the  petitioners  had  — 

"failed  to  establish  any  exceptional  reason  why  the 
corporation  could  carry  wood  fuel  at  unusually  low 
rates." 

They  also  said,  — 

"This  Board  cannot  decide  that  a  charge  not  ma- 
terially in  excess  of  the  average  charge  on  similar 
articles  is  unreasonable,  unless  it  is  -prepared  to  go  on, 
and,  when  petitioned,  to  remodel  the  -whole  tariff  of 
this  and  other  roads  upon  the  basis  thus  laid  down. 
Such  a  course  is,  at  present,  out  of  the  question.  The 
Commissioners  must  in  every  case  not  based  on  gen- 
eral complaints  of  extortion  assume  that  the  average 


charge  on  similar  service  is  reasonable,  and  having 
ascertained  that  assume  it  as  the  standard." 

R.R.  Comrs.  Report,  1871,  pp.  115-120. 

The  rules  thus  carefully  stated  and  published  in  their 
first  decision  upon  rates  have  been  followed  by  the  com- 
mission in  all  cases  since,  and  have  never  been  questioned. 

In  1872  the  commissioners  applied  this  standard  of 
"usual  rates"  to  the  question  of  whether  the  rates  charged 
for  season  tickets  was  excessive,  either  as  compared  with 
rates  for  similar  distances,  or  with  rates  charged  for  longer 
distances,  and  printed  a  table  showing  that  in  the  case 
before  them  the  rate  was  not  excessive  as  compared  with 
similar  rates  on  other  roads. 

R.R.  Comrs.  Report,  1872,  pp.  ccvi.  ccviii. 

In  1877,  upon  a  resolve  of  the  legislature  (c.  25,  Re- 
solves, 1876),  the  commissioners  investigated  the  rates 
charged  upon  coal  between  points  on  the  Hudson  river 
and  points  in  Berkshire  county.  The  citizens  of  Pittsfield, 
who  appear  to  have  been  the  moving  parties  in  the  inves- 
tigation, claimed,  among  other  things,  that  the  rate  on  coal 
into  Berkshire  county  was  in  itself  excessive.  The  com- 
missioners said  that,  in  considering  this  complaint,  — 

w  It  is  necessary  to  arrive  at  a  clear  understanding 
of  what  is  meant  by  a  rate  of  freight  which  is  in  itself 
excessive.  The  commissioners  presume  that  it  must 
be  some  tariff  imposition  clearly  and  palpably  out  of 
proportion  to  the  service  rendered,  constituting  an  ap- 
parent exaction  through  the  enjoyment  of  a  monopoly, 
or  suggesting  a  suspicion  that  it  originates  rather  in  a 
desire  on  the  part  of  the  corporation  opposing  it  not  to 


10 


do  business,  or  to  direct  business  into  some  other 
channel,  than  in  the  expectation,  of  realizing  undue 
profits  from  it." 

And  in  that  case,  while  the  commissioners  said  the  rates 
were  higher  than  they  had  recommended,  and  that  the 
good  policy  of  the  corporation  in  exacting  them  might  be 
called  in  question,  yet  the  commissioners  could  not  say  that 
they  were  in  themselves  excessive. 

R.R.  Comrs.  Report,  1877,  pp.  69,  70. 

The  commissioners  then  proceeded  to  compare  the  rates 
in  question  with  the  rates  for  similar  service  on  other  rail- 
roads. They  first  drew  a  distinction,  which  they  said  was 
"so  obvious"  that  it  did  not  require  to  be  dwelt  upon, 
between  the  railroads  which  handled  such  large  amounts 
of  coal  as  enabled  them  to  keep  a  large  machinery  for  that 
purpose  in  constant  and  regular  motion,  and  distributing 
roads  which  handled  comparatively  small  amounts,  deliver- 
ing them  at  numerous  points.  They  then  compared  the 
rates  with  those  of  other  similar  distributing  companies  in 
New  England,  and  printed  a  table  of  the  rates  of  such 
companies  for  substantially  similar  distances.  From  this 
they  said  it  appeared  that  the  rates  were  nearly  the  "  aver- 
age "  rates  per  ton  on  other  roads,  and  therefore  held  that 
the  rates  were  not  excessive  upon  that  ground,  saying, : — 

"Under  these  circumstances  the  commissioners  have 
in  conclusion  to  report  that  the  transportation  of  coal 
into  Berkshire  county  does  not  seem,  so  far  as  they 
can  discover,  to  be  carried  on  in  any  way  essentially 
different  from  the  way  in  which  it  is  carried  on  in  the 
other  counties  of  the  state.'"'' 


11 


And  therefore  they  said, 


"Although  it  was  very  apparent  that  a  reduction  in 
the  cost  of  the  carriage  of  coal  would  have  a  bene- 
ficial effect  on  the  manufacturing  industries  of  the 
state,  especially  on  those  like  glass  or  iron  into  which 
coal  enters  largely,  they  were  not  prepared  to  rec- 
ommend any  reduction  on  the  rates  into  Berkshire 
county." 

Id.  pp.  76,  77. 

In  this  report  the  commissioners  discussed  the  question 
of  the  comparative  charge  for  short  and  for  long  distances, 
and  said  it  could  not  be  maintained  that  rates  for  carrying 
coal  or  any  other  merchandise  comparatively  short  dis- 
tances'  were  excessive,  because  the  charge  for  carrying 
each  ton  one  mile  was  several  times  larger  than  it  would 
be  if  the  same  ton  were  carried  a  great  number  of  miles 
further.  They  illustrated  this  somewhat  at  length,  con- 
cluding by  saying  that  it  was  "no  ground  for  complaint 
against  the  corporation  that  its  rate  per  ton  per  mile  on 
short  local  business  was  very  much  in  excess  of  its  rate  per 
ton  per  mile  on  through  business." 

In  1880,  in  a  petition  against  the  Eastern  Railroad  for 
reduction  of  fare,  the  commissioners  declined  to  interfere, 
although  they  said  that  from  a  commercial  point  of  view 
the  railroad  managers  had  made  a  serious  mistake.  They 
said,  — 

"  It  is  not  for  the  Board  of  Railroad  Commis- 
sioners TO  UNDERTAKE  TO  INSTRUCT  THOSE  MAN- 
AGING THE  ROADS  AS  TO  THE  PROPER  WAY  OF  MAN- 
AGING THEM  COMMERCIALLY,  PROVIDED  THEY  DO  NOT 
MANAGE  THEM  UNREASONABLY." 


12 


R.R.  Comrs.  Report,  1880,  p.  219. 

In  188 1  the  board  were  asked  to  recommend  a  reduc- 
tion in  freights  on  coal  on  the  Albany  road.  They  pro- 
ceeded to  compare  the  rates  complained  of  on  the  Albany 
road  between  Palmer  and  Ware  and  other  points  on  that 
part  of  the  Albany  road,  with  rates  for  like  service,  that  is, 
for  similar  distances,  on  other  roads,  by  tables  which  were 
printed  in  their  decision,  and  said,  — 

"It  appears  from  this  table  that  a  minimum  rate  of 
fifty  cents  is  usual,  and  the  Board  cannot  say  that  it 
is  unreasonable." 

R.R.  Comrs.  Report,  1881,  p.  210. 

In  1882,  upon  a  petition  for  reduction  of  fares  between 
Boston  and  Stony  Brook  and  Weston  on  the  Massachusetts 
Central  and  Fitchburg  roads,  the  commissioners  said,  — 

"Comparing  Stony  Brook  and  Weston  with  other 
stations  of  like  distance,  we  find  the  following  re- 
sult," — 

and  then  they  print  a  table  showing  the  fares  for  like  dis- 
tance on  other  roads,  and  that  the  rates  complained  of 
were  not  substantially  higher  than  such  fares.  Upon  this 
they  said  it  was  "  impossible  to  say  that  the  fare  to  Stony 
Brook  was  unreasonable,  and  the  Board  would  not  be 
warranted  in   making  any  recommendation  in  regard  to 

it." 

R.R.  Comrs.  Report,  1882,  pp.  125,  127. 

In  1883,  upon  complaint  of  the  selectmen  of  Pittsfield  of 
alleged  unreasonable  rates  upon  coal  and  other  commodi- 
ties on  the  Albany  road  they  instituted  a  comparison  with 
rates  on  other  roads,  and  said  that  — 


13 


"  Upon  comparison  with  other  and  general  coal 
rates  in  the  state  the  rate  charged  does  not  seem  to 
be  an  unreasonable  amount  to  be  received  for  the 
transportation  of  the  coal  in  question." 

In  this  case  they  again  restated  the  principle  upon 
which  the  board  had  uniformly  acted  with  regard  to 
rates,  saying,  — 

"  The  question  is  not  whether  we  consider  the  rate 
as  exactly  the  right  one,  but  whether  it  is  so  unrea- 
sonably high,  so  palpably  out  of  proportion  to  the 
service  rendered,  that  we  should  recommend  a  reduc- 
tion, and  in  case  the  recommendation  is  not  complied 
with  follow  it  with  a  call  upon  the  General  Court  to 
revise  it  by  special  legislation." 

R.R.  Comrs.  Report,  1883,  pp.  133,  134. 

In  1884  the  commissioners  were  asked  to  recommend,  a 
reduction  of  certain  suburban  passenger  rates  on  the  Bos- 
ton &  Lowell  Railroad,  but  they  said  that  — 

"  A  comparison  of  suburban  rates  on  the  various 
roads  within  ten  miles  of  Boston  shows  that  the  rates 
in  question  are  as  low  as  the  average  in  like  cases," — 

and  therefore  declined  to  recommend  the  reduction. 

It  is  to  be  observed  that  in  this  case  the  commissioners 
also  said,  — 

"  It  is  our  belief  that  the  Boston  and  Lowell  Rail- 
road would  find  it  possible  to  reduce  its  rate  at  this 
and  other  similar  stations,  but  as  the  Board  had  occa- 
sion to  say  before,  on  a  like  question,  it  is  not,  how- 
ever,  for  the   Board  of  Railroad  Commissioners   to 


14 


undertake  to  instruct  those  managing  the  roads  as  to 
the  particular  way  to  manage  them  commercially, 
provided  that  they  do  not  manage  them  unreasonably. 
It  is  unnecessary  to  say  that  on  steam  railroads  we 
have  no  -power  and  we  have  no  desire  to  have  power 
to  fix  rates.'1'' 

R.R.  Comrs.  Report,  1884,  pp.  150,  151. 

In  1885,  upon  a  petition  for  the  reduction  of  the  coal 
rates  from  Boston  to  Lowell,  twenty-six  miles,  from  85 
cents  to  65  cents  a  ton,  the  commissioners  proceeded  to 
compare  the  rate  with  that  for  similar  service  on  other 
roads,  and  said,  "  A  comparison  of  rates  for  like  distances 
on  other  roads  in  this  state  utterly  fails  to  show  unrea- 
sonableness in  the  charge."  They  therefore  declined  to 
recommend  a  reduction. 

R.R.  Comrs.  Report,  1885,  p.  130. 

In  the  same  year,  upon  a  petition  for  the  reduction  of 
passenger  rates  on  the  Boston,  Revere  Beach  &  Lynn 
Railroad,  the  commissioners  said,  — 

"It  is  hardly  necessary  to  say  that  in  Massa- 
chusetts the  power  of  fixing  rates  has  not  been  given 
to  the  Commissioners.  Only  when  fares  or  rates  are 
manifestly  and  palpably  unreasonable,  it  is  our  duty 
to  recommend  a  reduction ;  and,  if  necessary,  recom- 
mendation may  be  followed  by  an  appeal  to  the  legis- 
lature. A  rate  may  appear  to  the  Board  to  be  un- 
wise, and  calculated  to  produce  discontent,  and  there- 
fore to  injure  the  company ;  but  this  does  not  author- 
ize us  to  recommend  reduction  if  it  is  not  unreason- 
able." 

Id.  p.  139. 


15 


The  board  then  said,  — 


"We  cannot  pronounce  these  rates  unreasonable  by 
comparison  with  oilier  roads"  and  refused  to  recom- 
mend a  reduction,  but  did  recommend  a  revision. 

Id.  p.  139. 

In  1886  the  commissioners  had  before  them  a  complaint 
as  to  coal  and  other  rates  on  the  Housatonic  railroad,  and 
they  proceeded  to  compare  the  rates  complained  of  with 
the  rates  of  all  the  other  roads  of  the  state  for  similar 
service,  and  printed  a  table  of  comparison  which  they  said 
in  their  opinion  showed  by  comparison  the  unreasonable 
nature  of  the  charge,  and  upon  that  basis  they  recom- 
mended a  reduction. 

R.R.  Comrs.  Report,  1886,  pp.  33,  34. 

But  the  action  of  the  commissioners  in  this  case  was 
under  a  special  statute  (c.  338,  acts  1885)  giving  the  board 
power  to  fix  rates,  so  that,  as  the  board  subsequently  said, 
they  were  substituted  "  by  legislative  power  for  the  direct- 
ors and  were  bound  to  exercise  a  wider  discretion  as  to 
rates  than  if  dealing  with  a  company  in  a  normal  condi- 
tion." * 

R.R.  Comrs.  Report,  1887,  p.  81. 

In  1886,  upon  a  complaint  of  excessive  coal  rates  on  the 
Albany  road  between  Rockdale  and  Worcester,  the  com- 
missioners compared  the  rates  for  similar  distances  on  the 
other  roads  of  the  state,  and  found  that  it  was  much  lower 
in  all  cases  than  the  rate  complained  of.  They  therefore 
held  that  the  complaint  was  maintained,  and  recommended 

*  For  the  order  fixing  rates  under  this  statute  see  Comrs.  Report,  1886, 
p.j48. 


16 


a    reduction   to  substantially   the   average    rate    of  other 

roads. 

Comrs.  Report,  1886,  pp.  119,  122. 

In  the  same  year,  upon  the  question  of  whether  coal 
rates  from  Springfield  to  West  Springfield  on  the  Albany 
road  were  excessive,  they  said  that  to  compare  the  rate 
with  the  rates  on  other  large  coal-carrying  roads  is  "  ut- 
terly useless."  They  then  proceeded  to  compare  the  rate 
with  local  rates  on  other  Massachusetts  roads,  by  a  table 
which  they  said  "  does  not  show,  or  tend  to  show  that  the 
charge  in  question  is  unreasonable."     They  then  added,  — 

"  The  question  for  this  Board  is  not  whether  we 
should,  as  Railroad  managers,  fix  the  rate  just  as  it  is 
fixed,  nor  whether  we  think  that  a  reduction  of  a  few 
cents  would  be  wise  and  desirable.  In  order  to  justify 
our  intervention  it  must  be  shown  that  the  rate  is 
clearly  unreasonable." 

R.R.  Comrs.  Report,  1886,  pp.  126,  127. 

In  1887,  on  a  petition  for  the  reduction  of  coal  rates  on 
the  Albany  road  between  North  Adams  and  Pittsfield,  the 
commissioners  said  that  the  rate  was  not  "  excessive  as 
compared  with  the  general  rates  charged  on  other  roads," 
and  printed  a  table  showing  those  rates.     They  then  said  : 

"We  have  often  had  occasion  to  say,  in  deciding 
petitions  like  the  present,  that  it  is  not  enough  to  war- 
rant our  interposition,  that  we  think  it  would  be  wise 
and  expedient  to  reduce  rates.  It  must  be  shown  that 
they  are  so  unreasonable  and  excessive  as  to  warrant 
"an  appeal  to  the  courts,  or  to  the  General  Court,  if  our 
recommendation  is  disregarded.  Up  to  that  limit  the 
directors  are  proper  parties  to  fix  rates." 


17 

R.R.  Comrs.  Report,  1887,  pp.  79,  81. 

Again,  in  the  same  year,  upon  a  petition  for  reduction  of 
fares  on  the  Albany  road  between  Westboro  and  South- 
ville,  they  said  that  "to  obtain  such  a  recommendation  it 
must  be  shown  either  that  the  rate  is  in  itself  unreasonably 
high,  or  that  there  is  something  in  this  case  taking  it  out 
of  the  general  rule,"  and  then  they  add,  "  Neither  in  itself, 
nor  by  comparison  with  rates  on  other  roads  does  the 
price  seem  to  be  unreasonably  high." 

Id.  p.  93. 

Since  1887  there  has  been  comparatively  little  complaint 
to  the  commissioners  as  to  rates,  and  there  are  therefore  no 
opinions  or  orders  on  that  subject.  But  in  1893  the  com- 
missioners in  their  report  reviewed  the  legislation  with  re- 
gard to  regulation  of  rates,  and  showed  that  the  policy  of 
the  state  had  been  not  to  attempt  to  revise  the  tariffs  of  the 
railroad  companies.  They  then  stated  what  the  result  of 
this  has  been,  and  said  that  "Massachusetts  has  every  rea- 
son to  be  satisfied  "  with  the  result  of  the  policy.  They 
stated  that  the  average  passenger  fare  per  mile  in  Massa- 
chusetts was  1.83  cents,  as  against  2.03  cents  in  the  Mid- 
dle states  and  a  still  higher  rate  for  all  other  sections  of 
the  United  States,  so  that  passenger  fares  are  "  as  low,  and 
probably  lower,  in  Massachusetts  than  in  any  other  State." 
They  also  said,  that  — 

"While  the  lowest  average  freight  rates  per  ton 
mile  are  of  course  to  be  found  in  those  states  through 
which  passes  the  greatest  proportionate  bulk  of  long- 
haul  freight  on  its  way  from  the  interior  to  the  sea- 
board, it  is  safe  to  say  that  the  rates  arc  not  lower  in 
any  other  state  whose  freight  business  as  a  whole  is 


18 


similar  to  that  of  Massachusetts,  and  the  most  san- 
guine railroad  reformer  would  hardly  have  ventured 
to  predict  twenty  years  ago  a  reduction^from  2.81  cents 
to  1.36  cents  per  average  ton  mile." 

,  R.R.  Comrs.  Report,  1893,  pp.  13,  16. 

Since  1893  the  decrease  in  rates  has  continued.  In 
1899  tne  passenger  rate  was  1.77  and  the  freight  rate  1.18 
per  mile,  and  during  the  year  ending  June  30,  1900,  the 
passenger  rate  was  1.75,  and  the  freight  rate  1.22  per 
mile.  The  slight  increase  in  the  freight  rate  was  doubtless 
due  to  the  fact  that  the  Fitchburg  carried  less  freight  for 
export  at  excessively  low  rates  in  1900  than  in  1899. 

This  rule,  that  upon  the  question  of  whether  a  particu- 
lar rate  is  excessive  the  commissioners  will  only  inquire 
whether  it  is  reasonable  as  compared  with  other  rates  for 
similar  services  in  Massachusetts,  has  been  acted  upon  by 
the  commissioners  for  more  than  thirty  years.  It  was  es- 
tablished upon  mature  consideration,  it  has  been  frequently 
discussed  and  always  confirmed  by  the  board.  It  has  the 
sanction  not  only  of  Charles  Francis  Adams  and  his  asso- 
ciates, by  whom  it  was  first  laid  down,  but  also  that  of 
Thomas  Russell,  George  G.  Crocker,  and  John  E.  San- 
ford,  and  their  able  associates  on  this  board.  It  has  stood 
the  test  of  argument  and  of  experience.  Under  the  ad- 
ministration of  this  rule  by  the  board,  railroad  capital  in 
Massachusetts  has  been  safe,  and  the  public  have  been 
well  served. 

It  may  be  urged  that  this  rule  leaves  the  tariffs  to  be 
made  by  the  railroad  companies,  and  that  this  is  not  wise. 
A  sufficient  answer  to  this  objection,  if  made  before  the 
commissioners,  would  seem  to  be  that  this  rule  is  one 
which  the  legislature  itself  has  established,  and  therefore 


19 


its  wisdom  is  not  to  be  questioned  here.  The  general  law 
provides  that  the  companies  may  establish  fares,  tolls,  and 
charges  at  such  rates  as  may  be  determined  by  their  di- 
rectors, subject  only  to  revision  and  alteration  by  the  gen- 
eral court,  or  such  officers  or  persons  as  it  may  appoint  for 
that  purpose.     (P.S.  section  180,  chapter  112.) 

The  legislature  has  never  attempted  to  revise  and  alter 
railroad  tariffs,  nor  has  it  appointed  any  officers  or  per- 
sons to  revise  and  alter  railroad  tariffs  in  Massachusetts. 
It  is  true  it  has  required  the  railroad  commissioners  to  keep 
themselves  informed  with  regard  to  the  manner  in  which 
railroads  are  operated,  and  to  inform  any  railroad  corpora- 
tion of  any  change  in  its  rates  of  fare  for  transporting 
freight  or  passengers,  or  in  the  mode  of  operating  its  road 
and  conducting  its  business,  which  they  deem  expedient 
and  reasonable  in  order  to  secure  the  convenience  and  ac- 
commodation of  the  public.     (P.S.  section  16,  chapter  112.) 

But  this  obviously  does  not  impose  upon  the  commission- 
ers the  duty  of  revising  the  tariffs  of  the  railroads.  The 
power  conferred  by  this  section  is  a  power  to  recommend 
a  change  in  rates,  and  is  entirely  different  from  the  power 
to  revise  the  rates  referred  to  in  section  180.  The  revi- 
sion and  alteration  referred  to  in  section  180  is  a  fixing  of 
rates  by  the  legislature,  or  its  officers  or  agents.  That 
power  has  not  been  exercised  by  the  legislature,  either 
directly  or  through  others,  except  in  a  very  few  special 
cases.  That  power  is  absolutely  unlike  the  power  con- 
ferred by  section  16,  which  is  only  a  power  to  recommend 
changes  in  rates  which  are  found  to  be  excessive,  as  com- 
pared with  other  rates  for  similar  services. 

This  distinction  is  clearly  stated  by  the  commissioners 
in  Belair  Manufacturing  Company  v.  Boston  &  Albany 
Railroad,  R.R.  Comrs,  Report,  1887,  pp.  79-81. 


20 


The  legislature  has  occasionally  been  asked  to  give  the 
commissioners  general  power  to  fix  rates,  but  it  has  always 
refused  to' do  it.  The  commissioners  have  constantly  as- 
serted that  they  did  not  desire  that  power,  and  nothing  can 
be  more  clear  than  that  under  the  present  law  of  Massa- 
chusetts the  companies  have  the  power  to  make  their  tariffs 
and  to  fix  their  own  rates. 

There  is  therefore  no  occasion  to  discuss  the  question 
whether  it  is  wise  for  the  companies  to  be  allowed  to  make 
their  tariffs  and  fix  the  prices  for  the  transportation  they 
perform . 

But  why  should  they  not  do  it?  Why  should  the  owners 
of  railroad  property  be  deprived  of  the  power  to  fix  the 
price  at  which  they  shall  part  with  it?  The  transportation 
which  is  sold  by  the  railroad  companies  is  private  property. 
The  capital  which  produces  it  is  all  private  capital.  This 
capital  is  all  at  the  risk  of  the  business.  There  is  no 
guaranty  by  the  public  of  any  return  upon  it.  Why, 
then,  should  the  public  fix  the  price  at  which  the  transpor- 
tation is  to  be  sold  to  it,  unless  it  at  the  same  time  guaran- 
tees that  the  price  fixed  shall  produce  a  reasonable  return 
upon  the  capital  ?  The  state  cannot  fix  the  price  at  which 
railroad  companies  must  obtain  labor,  supplies,  and  ma- 
terials for  the  operation  of  the  road,  or  the  rate  of  interest 
which  they  must  pay  upon  the  capital  borrowed.  The 
state  cannot  guarantee  the  amount  of  business  to  be  done 
over  the  railroads,  nor  can  it  protect  the  companies  against 
the  risks  and  accidents  in  the  operation  of  the  railroads. 
Why,  then,  should  the  state  assume  to  fix  the  price  at  which 
the  railroad  companies  shall  sell  their  transportation  ? 

A  railroad  company  in  Massachusetts  is  an  enterprise 
in  which  private  persons  invest  their  money  for  income, 
and  that  income  depends  upon   a  fluctuating  margin  be- 


21 


tween  what  the  companies  must  pay  out  for  the  mainte- 
nance and  operation  of  the  roads,  and  what  they  can 
take  in  for  the  transportation  which  they  sell.  The  capital 
is  at  the  risk  of  the  business.  It  is  true  this  is  the  case 
with  all  business,  for,  ultimately,  the  value  of  a  business 
depends  upon  a  fluctuating  margin  between  expenses  and 
receipts.  But  in  the  case  of  capital  invested  in  other  en- 
terprises if  the  business  is  likely  to  prove  non-remunera- 
tive it  may  be  discontinued.  Capital  invested  in  ordinary 
business,  or  in  manufactures,  banking,  insurance,  or  other 
business  of  a  larger  kind,  may  be  withdrawn,  or  the  busi- 
ness may  be  curtailed  to  meet  reduced  receipts.  But  capi- 
tal invested  in  railroads  cannot  be  withdrawn  ;  their  opera- 
tions cannot  be  substantially  curtailed,  although  their 
receipts  may  fall  off. 

It  should  always  be  remembered  that  the  owners  of  rail- 
roads have  a  direct  and  constant  interest  in  selling  as  much 
transportation  as  possible.  Transportation  is  the  most 
perishable  of  all  perishable  commodities.  It  is  service 
which,  if  not  performed  to-day,  can  never  be  performed. 
It  is  for  the  interest  of  the  owners  of  a  railroad  to  work 
the  road  and  its  equipment  to  their  highest  capacity  ;  to 
sell  as  much  transportation  each  day  as  they  possibly  can. 
Competition  will  undoubtedly  at  times  compel  them  to  sell 
some  portion  at  cost  or  less ;  other  causes  may,  and  often 
do,  induce  them  to  sell  some  transportation  at  cost  or  less 
than  cost.  There  is  no  real  danger  that  a  railroad  com- 
pany will  not  sell  all  the  transportation  which  it  can  effi- 
ciently perform  at  prices  which  it  can  fairly  afford  to  take. 

The  creditor  must  have  his  interest  upon  his  bonds,  and 
the  stockholder  desires  and  should  receive  his  dividend. 
The  public  continually  desire  increased  accommodation 
and  efficiency  of  service,  and  the  railroad  manager  is  under 


22 


constant  inducement  to  increase  the  whole  business  of  the 
road  at  reasonably  profitable  rates.  The  railroad  officials 
are  trained  and  experienced  men.  They  know  where  a 
reduction  of  rate  will  produce  an  increase  of  business  better 
than  anybody  else.  And  they  also  know,  what  should 
always  be  borne  in  mind,  that  if  the  reduced  rate  in  one 
place  or  upon  one  class  of  business  does  not  produce  an 
increase  of  business  and  of  net  revenue,  the  deficiency 
must  be  made  up  by  a  higher  rate  somewhere  else,  or 
result  in  the  reduction  of  net  earnings  or  in  an  impair- 
ment of  service. 

In  considering  the  question  of  a  proposed  reduction  of 
rate  the  first  consideration  is  therefore  whether  the  busi- 
ness to  which  the  rate  is  applied  is  elastic,  so  that  it  will 
increase  under  the  lower  rate  and  return  as  much  or  more 
net  revenue.  It  may  be  proper  also  to  consider  whether  a 
rate  may  not  be  reduced  upon  one  commodity  even  at  the 
expense  of  reduction  in  revenue  if  thereby  the  business 
upon  which  another  rate  is  levied  is  increased  so  that  upon 
the  whole  the  net  revenue  is  not  reduced,  or  is  increased. 
It  is  impossible  to  consider  the  rate  on  one  article  between 
two  points  separate  and  apart  from  the  rates  on  all  other 
articles  and  between  all  other  points  upon  the  same  rail- 
road, that  is,  apart  from  the  entire  railroad  enterprise  in 
which  the  capital  of  the  company  is  embarked. 

It  is  impossible  to  "fix  "  rates.  They  are  the  price  of 
transportation,  and,  like  other  prices,  are  controlled  by 
supply  and  demand,  and  by  countless  commercial  causes 
beyond  the  control  of  the  companies,  or  of  any  one  else. 
To  fix  rates  requires  the  power  to  fix  the  conditions  to 
which  the  rates  are  applied.  These  conditions  are  beyond 
the  control  of  the  companies  or  of  the  state,  and  are  con- 
stantly shifting    from    commercial,   economic,  social,  and 


_'.; 


political  causes.  The  result  is  thai  a  tariff,  like  a  system 
of  taxation,  is  a  growth. 

The  conditions  which  affect  the  fixing  of  rates,  and  con- 
trol the  making  of  railroad  tariffs,  are  complicated  and 
constantly  fluctuating.  The  railroad  officials  whose  pro- 
fession it  is  to  adapt  those  rates  to  the  business  ought  to 
be,  and  I  believe  are  conceded  to  be,  the  most  competent 
persons  to  make  the  rates.  If  the  time  shall  come  when 
they  are  not,  then  the  state,  instead  of  fixing  the  tariffs, 
should  take  the  roads  and  operate  them,  returning  to  the 
private  owners  a  reasonable  income,  or  such  income  as 
they  may  be  entitled,  under  their  charters,  to  have,  upon 
their  capital  invested  in  them.  But  for  the  legislature  to 
attempt  to  fix  the  tariffs  of  all  the  railroads  in  the  common- 
wealth, and  leave  the  operation  of  the  railroads  in  the 
hands  of  the  owners,  and  at  the  same  lime  to  secure  an 
efficient  public  service,  would  be  to  attempt  an  impossible 
task. 

Massachusetts  has  wisely  refrained  from  attempting  this 
task.  It  has  recognized  that  efficient  service  requires 
adequate  public  accommodation  for  that  service.  The  ex- 
cellent condition  of  Massachusetts  railroads,  and  the  high 
character  of  the  service  they  render  the  public,  is  largely 
due  to  the  fact  that  the  legislation  of  the  commonwealth 
with  regard  to  railroads  has  been  to  require  better  service 
and  more  ample  accommodation,  and  not  to  require  a  less 
price  for  the  service.  Massachusetts  has  wisely  left  the 
companies  to  make  their  own  tariffs,  subject  only  to  the 
supervision  of  the  board  on  the  lines  laid  down  by  it  in 
187 1,  and  constantly  adhered  to  ever  since. 

But  this  is  not  only  the  rule  which  has  been  established 
and  followed  by  the  commission  in  Massachusetts.  It  is 
also  the  only  rule  that  can  be  followed  unless  the  board 


24 


are  to  attempt  to  do  that  which  the  legislature  has  not  re- 
quired them  to  do,  and  what  they  cannot  in  fact  do,  —  that 
is,  to  revise  and  fix  from  time  to  ti?ne  all  railroad  rates, 
on  all  railroad  transportation,  state  and  interstate,  by  all 
the  railroads  of  the  commonwealth. 

If  the  commissioners  should  be  required  by  the  legisla- 
ture, or  should  of  their  own  motion  attempt  to  pass  upon 
the  reasonableness  of  all  the  rates,  they  would  find  the 
difficulties  so  insuperable  that  they  would  necessarily  aban- 
don the  task.  If  the  commissioners  should  attempt  to  reg- 
ulate the  tariff  of  a  single  road  as  a  whole,  they  would  be 
required  to  fix  not  only  freight,  but  passenger  rates,  not 
only  state,  but  interstate  rates. 

By  what  standard  would  they  proceed  if  the  existing 
rates,  which  are  the  result  of  countless  commercial  causes, 
of  the  law  of  supply  and  demand  operating  in  innumer- 
able ways  and  at  countless  points  (for  the  local  freight 
tariff  of  the  New  Haven  road  alone  contains  nearly  two  and 
a  half  million  different  entries  of  charges),  are  not  to  be 
taken  as  reasonable,  and  any  specific  rate  compared  with 
them  as  the  standard  by  which  to  judge  whether  the  speci- 
fic rate  is  excessive?  If  this  standard  is  not  to  be  taken, 
then  another  standard  must  be  found.     What  is  it  to  be? 

It  has  been  claimed  by  the  petitioners  that  this  standard 
is  to  be  found  in  the  cost  of  the  particular  service  for  which 
the  rate  is  charged.  But  it  is  impossible  to  ascertain  the 
cost  of  any  particular  service  performed  by  a  railroad 
company  under  existing  conditions. 

It  is  impossible  to  ascertain  the  actual  cost  of  transport- 
ing freight  or  passengers  between  two  points,  or  to  ascer- 
tain the  actual  cost  of  transporting  all  freight,  or  any  par- 
ticular kind  of  freight,  between  two  points  on  a  large  rail- 
road system,  like  the  New  York,  New  Haven  &  Hartford 


25 


Railroad,  with  any  substantial  accuracy,  that  is,  with  any 
such  accuracy  as  to  make  the  actual  cost  of  the  particular 
transaction  a  factor  of  any  value  in  fixing  the  price  to  be 
charged. 

Independent  of  the  practical  impossibility  of  apportioning 
the  fixed  charges,  like  the  salaries  of  general  officers,  taxes, 
interest,  and  other  similar  expenses,  it  is  impossible  to  sep- 
arate the  expense  of  any  particular  transaction,  like  the 
transportation  of  a  particular  trainload  of  freight  or  pas- 
sengers, or  the  transportation  of  a  particular  class  of 
freight  or  passengers,  between  two  points,  from  the  trans- 
portation of  all  other  freight  or  passengers  between  those 
points. 

For  instance,  take  the  case  of  bridges  between  Brockton 
and  Fall  River.  How  can  you  say  how  much  of  the  cost 
of  the  maintenance,  repair  or  renewal,  or  safe-guarding  of 
each  bridge  is  to  be  charged  to  a  particular  class  of  freight, 
or  to  a  particular  train  that  runs  over  a  bridge? 

Is  this  expense  to  be  charged  wholly  to  the  freight  and 
passengers  which  do  pass  over  the  bridge?  If  so,  how,  in 
the  case  of  local  trains  which  leave  and  take  passengers 
and  freight  from  station  to  station,  is  the  freight  and  pas- 
senger business  actually  passing  over  the  bridge  to  be 
ascertained,  and  in  what  proportion  is  the  expense  to  be 
charged  to  the  various  classes  of  passengers  and  of  freight 
passing  over  the  bridge?  What  portion  is  to  be  charged 
to  empty  cars  that  pass  over  the  bridge?  How  is  the  in- 
come from  the  freight  which  actually  passes  to  be  ascer- 
tained, so  that  the  cost  may  be  applied  to  it,  without  ascer- 
taining where  all  the  freight  originated  on  each  side  of  the 
bridge,  and  where  it  terminated  on  the  other  side? 

Again,  the  traffic  over  the  bridge  is  doubtless  at  times 
greater  in   one   direction  than   in  the  other.     Are  you  to 


26 


charge  the  traffic  proportionately,  and  vary  the  charges  ac- 
cording to  the  direction  in  which  the  business  is  carried? 
Or,  if  expensive  repairs  become  necessary  [upon  the  bridge, 
or  it  requires  renewal,  is  the  cost  of  the  repairs  or  of  the 
renewal  to  be  charged  wholly  to  the  business  passing  over 
that  bridge,  and  the  rates  on  that  business  advanced  ^pro- 
portionately ? 

Take  another  illustration.  The  repair  and  maintenance 
of  a  large  railroad  vary  on  different  portions  of  the  road 
each  year.  There  are  conditions  of  climate,  of  storm,  of 
wind,  and  countless  vicissitudes,  varying  the  necessity  for 
expense  in  maintenance  and  repair  upon  different  portions 
of  every  large  road,  especially  in  New  England.  Suppose 
it  is  necessary,  for  instance,  upon  the  road  between  Fall 
River  and  Brockton,  to  spend  in  some  one  year  twice  as 
much  as  upon  other  portions  of  the  road  :  are  the  rates  of 
business  upon  that  part  of  the  road  to  be  correspondingly 
advanced,  and  then  when  upon  some  other  part  of  the  road 
it  becomes  necessary  to  make  unusual  expenditures,  or 
those  beyond  the  average  for  these  purposes,  and  less  is 
expended  upon  the  line  from  Brockton  to  Fall  River,  are 
the  rates  upon  the  business  between  those  places  to  be  re- 
duced? 

Again,  trains  run  over  the  road  from  Brockton  to  Fall 
River  not  only  between  those  points,  but  between  many 
other  points  on  either  side  of  those  points.  How  are  you  to 
separate  the  cost  of  maintaining  bridges,  tracks,  switches, 
signals,  etc.,  between  those  points  for  the  benefit  of  the 
business  between  those  points  from  the  cost  for  the  benefit 
of  the  business  between  all  other  points? 

Take  the  case  of  a  locomotive  which  breaks  down,  ex- 
plodes, or  is  destroyed  by  an  accident  while  hauling  a 
freight  train  between  Fall  River  and  Brockton.     To  what 


27 


business  is  the  cost  of  replacing  or  repairing  that  locomo- 
tive to  be  charged?  To  the  freight  actually  behind  it,  being 
hauled  by  it  when  it  was  destroyed  or  injured?  Obviously 
not.  Is  it  to  be  charged  to  all  the  freight  between  those 
two  points?  If  so,  then  the  rates  must  be  correspondingly 
increased,  or  by  a  single  accident  to  a  train  and  its  crew 
the  entire  profit  of  that  business  for  a  single  year  might 
wholly  disappear. 

Again,  how  are  the  expenses  of  station  agents  on  a  par- 
ticular part  of  the  line  to  be  apportioned  to  each  particular 
kind  of  business  which  the  line  does?  There  are  station 
agents  at  some  stations  who  attend  not  only  to  the  selling 
of  tickets,  but  to  the  receiving  and  delivering  freight, 
handling  express,  and,  in  some  cases,  to  the  telegraph  busi- 
ness. How  are  their  salaries  to  be  apportioned  between 
these  different  classes  of  business  at  the  station?  At  one 
station  there  is  a  larger  amount  of  business  than  at  another, 
and  yet  one  man  cares  for  the  business  at  each  station.  Is 
his  pay  to  be  apportioned  so  that  the  rates  upon  the  larger 
amount  of  business  will  be  less  than  upon  the  smaller 
amount  in  each  case? 

Take  another  illustration.  There  are  numerous  water 
tanks,  each  maintained  at  an  expense  which  could  prob- 
ably be  practically  ascertained.  How  are  you  to  apportion 
this  expense?  Are  you  to  measure  the  water  which  each 
engine  takes,  and  charge  it  to  the  traffic  which  that  engine 
hauls?  Is  it  possible  to  apportion  that  expense  upon  the 
particular  article,  or  upon  each  particular  class  of  freight, 
which  the  engine  hauls? 

What  are  you  to  do  in  the  case  of  side  tracks?  A  freight 
train  running  from  New  Bedford  to  Boston  is  obliged  to  be 
side-tracked  for  some  other  train.  That  side  track  is  main- 
tained for  all  trains,  passenger  and  freight,  through  and 


28 


local.  How  can  you  tell  what  proportion  of  the  cost  of 
the  maintenance  of  that  track  is  to  be  charged  to  that 
train?  Possibly  one  train  may  run  a  certain  distance  with- 
out being  side-tracked,  and  the  next  train  may  be  side- 
tracked twice  or  three  times  in  the  same  distance.  Are 
you  to  charge  a  proportionate  part  of  the  side-track  ex- 
pense to  one  train  and  not  to  the  others?  Is  it  not  obvious 
that  you  cannot  apportion  this  item  of  cost  upon  any  of 
the  traffic  for  the  benefit  of  which  the  side  track  is  main- 
tained, but  that  it  must  be  charged  to  the  entire  traffic  of 
the  road? 

Take  the  case  of  taxation.  Local  taxation  is  an  import- 
ant item.  It  varies  in  different  counties  and  in  different 
states  through  which  the  railroad  runs.  Are  you  to  charge 
the  taxation  in  each  county  upon  the  business  in  that  county 
proportionately?  It  is  impossible.  Suppose  the  counties 
of  Bristol  and  Plymouth  tax  the  railroad  property  at  a 
lower  rate,  or  upon  a  lower  valuation,  than  the  county  of 
Norfolk  :  is  Norfolk  county  business  to  pay  more  and  Ply- 
mouth and  Bristol  counties  business  to  pay  less? 

Taxes  vary  in  the  same  county  from  year  to  year,  not 
only  in  rate  paid,  but  in  the  valuation,  which  is  the  basis 
of  the  tax.  Are  the  rates  to  be  adjusted  each  year  to 
meet  these  variations?     It  is  obviously  impracticable. 

Again,  some  locomotives  are  heavier  than  others,  and, 
of  course,  cause  a  greater  wear  to  the  permanent  way.  Are 
you  to  charge  the  expense  of  the  maintenance  or  renewal 
of  the  permanent  way  according  to  the  weight  of  engines? 
Some  trains  run  at  a  higher  speed  than  others,  and  cause 
a  correspondingly  greater  wear  to  the  track.  Is  it  possible 
to  apportion  the  expense  of  maintenance  upon  this  basis, 
so  that  the  heavier  and  swifter  locomotive  and  train  shall 


21> 


bear  a  proportionately  larger  part  of  the  expense  than  the 
lighter  or  slower  locomotive  and  train? 

What  are  you  to  do  about  the  handling  of  empty  cars 
which  earn  no  money? 

What  is  to  be  done  about  the  transportation  of  supplies 
of  the  company  itself?  Is  the  cost  of  transporting  these  to 
be  separated,  if  practicable?  Of  course,  if  the  rate  to  be 
charged  for  the  transportation  of  each  particular  kind  of 
business  is  to  be  based  upon  the  cost  of  doing  that  partic- 
ular business,  then  you  must  ascertain  the  cost  of  transport- 
ing the  supplies  for  the  company  and  take  them  into  ac- 
count, for  the  cost  of  transporting  the  supplies  of  a  large 
railroad  has  a  very  considerable  effect  upon  the  cost  of  its 
transportation  as  a  whole.  Again,  you  must  take  into  ac- 
count upon  the  question  of  cost  the  amount  and  the  regu- 
larity of  the  traffic.  It  makes  a  great  difference  to  a  rail- 
road whether  it  is  called  upon  to  handle  a  thousand  tons 
of  freight  a  day  for  a  hundred  days,  or  required  to  handle 
a  hundred  thousand  tons  of  freight  in  one  day. 

Take  a  single  further  illustration,  which  is  applicable  in 
New  England  especially.  On  some  portions  of  the  line 
the  road  may  be  blocked  during  the  winter  by  snow,  traffic 
entirely  stopped  until  the  snow  is  shovelled  out,  while 
upon  other  portions  of  the  line  the  traffic  goes  on.  Is 
the  expense  of  clearing  the  way  to  be  charged  to  the 
traffic  upon  that  portion  of  the  line  where  the  snow  blocks 
and  the  traffic  stops ;  and  if  so,  how  is  it  to  be  apportioned 
between  passengers  and  freight  upon  that  line  and  between 
the  different  classes  of  freight?  Are  the  rates  to  rise  or 
fall  according  to  the  severity  of  the  winters  or  the  preva- 
lence of  storms  upon  one  portion  of  the  line  and  not  upon 
others  ? 

Again,  take  the  question  of  stations,  and  the  abolition  of 


30 


grade  crossings  for  the  safety  and  convenience  of  the  public. 
Is  the  cost  of  these  to  be  charged  to  the  business  of  each 
locality?  If  the  people  of  a  town  desire  a  new  station,  or 
the  improvement  of  the  roads  in  that  town  by  the  abolition 
of  grade  crossings  of  its  public  ways,  are  they  to  have  this 
only  upon  the  condition  that  the  cost  of  it  shall  be  charged 
to  the  business  of  that  town? 

Competent  experts  say  that  there  are  nearly  a  hundred 
clear,  actual,  and  distinguishable  divisions  of  expense  in 
the  handling  of  the  same  class  of  freight  by  a  locomotive 
of  the  same  weight,  and  with  the  same  salary  paid  to  the 
train  hands,  upon  different  parts  of  a  single  railroad.  Cost 
depends  upon  the  grade,  and  curvatures  of  the  road,  the 
weight  of  locomotives  and  cars,  expenses  for  accidents  and 
fire  losses,  the  amount  and  regularity  in  volume  of  freight 
actually  carried,  the  salaries  of  the  engineers  and  the  fire- 
men and  brakemen,  compensation  of  station  agents,  of 
switchmen,  and  signal  men  ;  repair,  maintenance,  or  re- 
newal of  the  way,  expense  of  water,  drawbridges,  side 
tracks,  new  stations,  of  policing  the  tracks,  of  watchmen, 
telegraph  operators,  train-despatchers,  and  numerous  other 
employes.  It  is  obviously  impossible  to  separate  and  ap- 
portion these  and  other  like  expenses  under  the  constantly 
var}Ting  conditions  which  affect  the  transportation  of  freight 
and  passengers. 

No  competent  man  can  be  found  who  will  say  that  the 
cost  of  transportation  with  reference  to  any  particular 
transaction  can  be  ascertained  with  any  accuracy.  All 
who  have  examined  the  subject  admit  that  it  is  impossible 
to  ascertain  the  cost  of  a  single  class  of  business  so  ascer- 
tained as  to  make  it  any  guide  whatever  in  fixing  the  rate 
to  be  charged  for  that  business. 

As  early  as   1872  the   Massachusetts  railroad    commis- 


31 


sioners,  in  discussing    the  question  of  reduction  of  rates 
upon  coal,  said,  — 

"  In  pressing  their  views  upon  this  subject  on  the 
consideration  of  the  railroad  officials  the  Commission- 
ers have  frequently  been  met  by  an  inquiry  as  to  what 
they  considered  a  reasonable  rate  per  ton  per  mile  for 
the  carriage  of  coal.  This  question,  in  its  general 
form,  they  are  not  prepared  to  answer;  neither  do 
they  believe  that  a  specific  answer  to  it  is  possible  ex- 
cept where  every  condition  entering  into  the  cost  of 
transportation  is  first  definitely  established.  Few 
things  are  more  fallacious  than  the  usual  estimates 
made  in  answer  to  inquiries  as  to  what  it  costs  to  move 
a  ton  of  freight ;  yet  the  answer  to  the  question  of  what 
is  a  reasonable  charge  for  moving  it,  necessarily  de- 
pends upon  what  it  costs  to  move  it.  A  given  railroad 
company  may  by  a  system  of  averages  arrive  at  some 
general  results  upon  this  subject,  deduced  from  its  in- 
dividual experience,  asserting  that  the  cost  is  one,  two 
three  or  more  cents  per  mile.  When,  however,  this 
.  statement  is  generalized  upon  and  made  to  cover  the 
whole  railroad  system,  creating,  as  it  were,  a  standard 
of  cost,  the  result  is  no  less  deceptive  than  it  would  be 
to  argue  as  to  the  cost  of  raising  a  bushel  of  wheat  or 
a  barrel  of  potatoes  from  the  experience  of  a  single 
farm  or  a  particular  district  of  country.  The  cost  of 
moving  freights  varies,  under  given  circumstances,  at 
least  as  much  as  the  cost  of  raising  crops.  In  the  one 
case  it  depends  upon  soil,  climate,  cost  of  labor  and 
the  amount  raised,  with  the  appliances  used  for  rais- 
ing it ;  in  the  other  upon  the  value  of  money,  the  cost 
of  construction  and  operation,  including  wages,  fuel 


32 


and  material ;  also  upon  the  quantities  seeking  trans- 
portation, the  regularity  of  its  movement  and  the  facil- 
ities for  handling  it." 

R.R.  Comrs.  Report,  1872,  p.  clxvii. 

In  1875  the  commissioners,  in  their  general  discussion  of 
fares  and  freights,  dealt  specifically  with  the  question  of  the 
cost  of  moving  freight,  and  referred  to  and  reaffirmed  their 
statements  upon  that  subject  in  the  report  for  1872.  In  the 
same  connection  they  referred  to  an  investigation  by  Oc- 
tave Chanute,  then  consulting  engineer  of  the  Erie  Rail- 
way Company,  who,  they  said,  had  treated  the  subject  in 
a  spirit  of  more  thorough  and  scientific  inquiry  than  any 
other  person.  They  said  that,  in  addition  to  studying  his 
paper  (which  is  entitled  "The  elements  of  cost  of  railroad 
freight  traffic,"  and  may  be  found  in  the  Transactions  of 
the  American  Society  of  Civil  Engineers,  vol.  2,  p.  381, 
1874),  they  had  entered  into  correspondence  with  him,  and 
that  he  had  expressed  himself  as  confident  that  the  formula 
for  ascertaining  cost  could  be  — 

"reduced  to  six  terms,  which,  however,  would  contain 
sixty  variable  quantities" 

They  then  say,  as  showing  the  immense  complexity  of 
this  problem  in  relation  to  which  so  many  and  such  confi- 
dent opinions  are  continually  advanced,  quoting  at  length 
from  one  of  Mr.  Chanute's  letters,  that  this  letter  more  than 
justifies  the  illustration  drawn  from  the  cost  of  producing 
crops  made  use  of  by  the  commissioners  in  their  third  an- 
nual report. 

R.R.  Comrs.  Report,  1875,  P-  37* 
The  commissioners  also  during  that  year  called  to  their 


33 


assistance  upon  the  question  of  cost  of  freight  traffic  the 
superintendents  of  the  various  roads  of  the  commonwealth, 
who  made  a  report  which  the  commissioners  published  as 
an  appendix  to  their  annual  report.  This  report  states  that 
about  63  per  cent  of  the  cost  of  operating  a  road  arc  mixed 
charges,  part  belonging  to  passenger  and  part  to  freight, 
and  that  the  superintendents  are  not  aware  of  any  rule  or 
method  by  which  the  exact  per  cent  chargeable  to  each  can 
be  determined.  And  in  conclusion  they  say  they  do  not 
believe  it  possible  to  fix  the  exact  cost  of  moving  freight  on 
the  eight  roads  then  leading  out  of  Boston. 

R.R.  Comrs.  Report,  1875,  P-  79- 

In   1898  the  board,  speaking  by  its  chairman,  Mr.  San- 
ford,  in  the  Brockton  rate  hearing  said,  — 

"We  state  in  our  report  every  year  that  the  ex- 
penses of  operation  per  passenger  train  mile  and  per 
freight  train  mile,  respectively,  cannot  be  stated,  be- 
cause the  operating  expenses  of  the  passenger  depart- 
ment are  not  kept  by  the  companies  separately  from 
those  of  the  freight  department.  They  cannot  be 
kept.  The  interstate  commerce  commission  has  been 
fighting  the  railroads  of  the  country,  or  did  fight  them 
for  a  series  of  years,  upon  that  very  question,  and 
tried  to  have  them  return  the  operating  expenses  of 
the  passenger  department  separate  from  the  freight 
department.  They  could  not  do  it,  and  the  interstate 
commerce  commission  attempted  to  figure  it  them- 
selves, until  finally  the  whole  matter  got  into  such  an 
absurd  condition  it  was  abandoned,  —  every  attempt 
to  separate  the  expenses  of  operation  of  the  passenger 
and  freight  departments." 


34 


And  yet  if  the  cost  of  any  particular  service,  either  pas- 
senger or  freight,  is  to  be  ascertained,  it  is  obvious  that  the 
cost  of  the  operation  of  the  passenger  department  must  be 
separated  from  the  cost  of  the  operation  of  the  freight  de- 
partment. 

It  cannot  be  done,  and  every  attempt  to  do  it  has  been 
abandoned  as  an  impossibility. 

In  1873  the  Massachusetts  Railroad  Commissioners,  in 
discussing  the  question  of  passenger  rates,  said,  — 

"  The  economical  principle  of  payment  strictly  ac- 
cording to  the  distance  persons  are  carried  is  obvi- 
ously incorrect.  Distance  has  very  little  to  do  with 
the  cost  of  transportation,  or  the  services  and  use  of 
the  property  of  a  corporation  for  which  each  traveller 
should  pay.  The  immense  item  of  fixed  cost  and 
equipment  —  stations  costing  hundreds  of  thousands 
of  dollars  —  a  road-bed  and  a  large  body  of  rolling 
stock  and  force  of  officials  to  be  kept  up,  are  all  ex- 
penses incurred  equally  for  the  passenger  who  travels 
one  mile  or  for  him  who  travels  ten.  The  usual  ar- 
gument in  support  of  the  fixed  charge  per  mile  is  that 
each  traveller  under  such  a  system  pays  for  what  he 
receives,  —  no  more  and  no  less.  The  fact  however, 
is  just  the  reverse  of  this.  Under  such  a  system  each 
person  does  nothing  of  the  kind.  He  pays  for  transpor- 
tation only,  —  he  does  not  pay  for  the  use  of  the  fixed 
capital,  which  all  travellers,  whether  those  for  greater 
or  for  less  distances,  share  the  benefit  of  equally." 

R.R.  Comrs.  Report,  1873,  pp.  42,  43. 

Again,  they  say  in  the  same  report,  — 

"If  the  amounts  paid  by  the    public  are  intended 


35 


correctly  to  correspond  to  the  cost  of  the  services  ren- 
dered by  the  corporations,  then  the  distance  that  a 
person  or  thing  is  carried  has  very  little  necessary 
connection  with  the  cost  of  carriage.  ...  As  re- 
gards merchandise  this  is  so  apparent  that  it  needs 
only  to  be  stated  to  be  understood." 

Id.  p.  56. 

In  this  report  for  1875,  which  contains  a  very  full 
discussion  of  the  question  of  regulating  fares  and  freights 
by  law  or  by  commissioners,  they  say,  — 

"The  rule  of  uniform  mileage  rate  is  also  wholly 
opposed  to  the  fundamental  principle  of  taxation,  that 
the  burden  should  in  all  cases  be  so  imposed  as  to  rest 
most  heavily  where  it  will  be  least  felt." 

Id.  p.  59. 

And  in  conclusion  they  state  as  a  final  objection  to  the 
making  of  rates  by  the  legislature  or  commissions  that  — 

"The  essence  of  the  system  is  that  certain  persons, 
whether  the  legislature  itself,  or  officials  designated 
by  the  legislature  have  devolved  upon  them  the  re- 
sponsibility of  establishing  the  revenue  of  property 
belonging  to  others.  The  Commissioners  have  grave 
doubts  as  to  the  success  of  any  effort  at  the  regulation 
of  the  railroad  system  which  practically  effects  a  sepa- 
ration between  the  ownership  of  a  railroad  and  its 
management" 

Id.  p.  63. 
In  their  annual  report  in  1890  the  Interstate  Commerce 


36 


Commission,  speaking  of   the  making  of   railroad  rates, 
said,  — 

"A  rule  that  should  measure  charges  by  cost  would 
work  an  entire  revolution  in  the  business  of  transpor- 
tation. .  .  .  Nothing  more  disastrous  to  the  com- 
merce of  the  country  could  possibly  happen  than  to 
require  the  rating  for  railroad  transportation  to  be 
fixed  by  this  one  rule.  But  the  consequences  would 
be  similar  if  any  other  single  test  of  a  carrier's  charges 
were  to  be  applied  ;  and  if  any  two  or  three  combined 
were  made  use  of,  the  probability  of  injury  to  the 
country  and  of  disaster  to  the  roads  would  be  only  a 
little  farther  removed.  .  .  .  Rates  are  never  meas- 
ured exclusively  by  the  weight  of  the  articles  carried, 
or  by  bulk,  or  by  the  cost  to  the  carrier  of  transport- 
ing them,  or  by  the  value  to  the  owner  in  having 
them  transported.  And  if  all  of  these  and  other  con- 
siderations bearing  upon  the  subject  are  taken  into 
account  in  the  determination  of  rates  as  they  habitually 
are,  there  is  no  rule  by  -which  it  can  be  determined 
how  much  importance  should  be  attached  to  any  one 
or  any  combination  of  them ." 

Fourth  Annual   Report,  Interstate  Commerce 
Com.,  pp.  14,  15. 

Albert  Fink,  one  of  the  most  accomplished  railroad  men 
of  the  United  States,  declared  that  — 

"The  expenditures  which  are  entirely  independent  of 
the  amount  of  work  performed  by  the  railroad,  form 
so  large  a  proportion  of  the  total  operating  expenses 
of  railroads  that  it  becomes  impossible  to  make  the 


37 


amount  of  work  performed  a  criterion  or  measure  of 
the  cost." 

"Cost  of  Railroad  Transportation," etc.  (1874), 
P-  3- 

Again,  he  said  that  — 

"A  tariff  established  strictly  upon  the  basis  of  cost 
would  be  of  little  use  unless  it  be  accompanied  by  a 
law  forcing  the  people  to  ship  over  the  road  a  certain 
quantity  of  freight  at  the  established  rates." 

Id.  p.  18. 

Again,  in  1880,  he  said,  — 

"To  make  even  an  approximate  estimate  of  the  cost 
in  any  given  case  is  a  work  of  great  difficulty  and 
complexity,  and  strictly  to  comply  with  a  condition 
that  a  railroad  tariff  in  order  to  be  reasonable  must  be 
based  upon  the  actual  cost,  and  must  be  made  in 
exact  proportion  to  cost,  is  an  impossibility." 

"The  Railroad  Problem  and  its  Solution,"  p.  5. 

Again,  in  1883,  he  said, — 

"  If  each  service  should  be  paid  according  to  its 
cost,  it  would  be  a  most  delightful  way  for  railroad 
companies  to  manage  their  railroads.  .  .  .  But  the 
effect  of  that  tariff  would  be  that  most  of  the  import- 
ant articles  now  carried  over  the  railroads  could  not 
be  carried  at  all.  .  .  .  The  principle  that  railroad 
charges  should  be  based  on  the  value  of  service  rather 
than  on  the  cost  is,  I  think,  the  correct  one.  .  .  . 
That  is  the  principle  that  is  followed,  not  only  here, 


38 


but  in  every  other  country.  Any  other  principle,  if 
adopted,  would  be  simply  ruin  to  the  best  interests  of 
the  country.  You  could  not  develop  a  country  under 
it.  This  principle  of  charging  according  to  the  value 
of  the  service  rendered  is  adopted  in  all  countries. 
.  .  .  The  attempt  to  show  that  the  railroads  are 
wrong  in  adjusting  their  tariffs  according  to  the  value 
of  the  service  rendered  is  based  upon  the  grossest 
ignorance  of  the  correct  principles  upon  which  trans- 
portation charges  should  be  made." 

Testimony  of  Albert  Fink,  before  the  United 
States  Senate  Committee  on  Labor  and  Edu- 
cation, September  17,  1883,  p.  61. 

For  further  views  of  Mr.  Fink  on  this  subject,  see  his 
argument  before  the  Select  Committee  of  Interstate  Com- 
merce before  the  United  States  Senate,  May  21,  1885. 

Grierson,  the  standard  authority  on  English  and  foreign 
railway  rates,  says  that  — 

"one  favorite  proposal,  often  refuted  but  constantly 
renewed,  is  to  base  rates  on  the  actual  cost  of  con- 
veyance plus  a  reasonable  return  on  the  capital  in- 
vested. But  it  is  no  light  presumption  against  this 
principle  that  though  so  often  proposed,  especially  by 
theorists,  nowhere  has  it  been  carried  out." 

He  says  further  that  — 

"such  a  principle  is  not  only  inconsistent  with  any 
kind  of  classification,  but  it  may  be  confidently  stated 
that  no  trustworthy  data  as  to  the  cost  of  conveying 
each  consignment  or  each  class  of  goods  in  the  actual 
intricacy    of   business    could   be    obtained.   ...     So 


39 


serious  are  the  difficulties  in  the  way  of  ascertaining 
facts  as  to  the  cost  of  transport,  so  varied  are  the  cir- 
cumstances in  this  country,  that  it  is  not  surprising 
that  in  every  instance  in  which  the  principle  has  been 
brought  before  a  parliamentary  committee  or  royal 
commission,  it  is  met  with  the  condemnation  expressed 
by  the  Select  Committee  of  1872,  —  'It  is  impracti- 
cable.'" 

"  Railway  Rates,  English  and  Foreign,"  pp.  8, 10. 

Mr.  Grierson  states  the  real  basis  of  rates  to  be  — 

"the  requirements  of  trade,  or  according  to  a  popular 
expression,  what  the  traffic  will  bear." 

He  says,  — 

"  It  is  easy  to  misrepresent  this  principle.  The  com- 
monest misrepresentation  is  to  assume  that  it  means 
charging  what  the  traffic  will  not  bear.  Rightly 
understood  this  is  the  only  fair  working  principle  ;  the 
only  scientific  rule,  if  that  phrase  has  any  clear  mean- 
ing. This  is  only  another  way  of  saying  that  rates 
should  be  so  fixed  as  to  enable  the  manufacturer  or 
trader  and  the  railway  company  to  obtain  a  reason- 
able profit,  and  that  rates  should  ultimately  be  deter- 
mined  by  the  law  of 'supply  and  demand''' 

He  compares  the  making  of  a  tariff  to  the  adjustment  of 
taxes,  saying  that  — 

"  What  an  article  will  bear  —  in  other  words,  what 
the  owner  can  with  convenience  pay  —  is  a  rule  alike 
applicable  to  taxation  and  railway  rates." 

Id.  pp.  68,  71. 


40 


The  English  Parliamentary  Committee  on  Railway 
Amalgamation  made  a  very  thorough  investigation  of  the 
question  of  railroad  tariffs,  and  in  their  report  declared 
that  M  //  is  impracticable  to  establish  any  standard  for  the 
revision  of  rates  and  fares  founded  on  cost  and  profit.'''' 

Rept.  Pari.  Com.  on  Railway  Amalgamation, 
1872,  p.  51.* 

Speaking  on  the  same  subject,  a  high  English  authority 
on  railway  rates  says  that  it  is  impossible  to  fix  a  maximum 
rate,  because  "the  circumstances  that  determine  the  cost  of 
carrying  goods  and  influence  the  remuneration  of  the  car- 
rier are  so  varied  and  complicated  that  it  is  impossible  to 
avoid  making  the  maximum  toll  too  high  or  too  low,  or 
indeed,  both  too  high  and  too  low  at  the  same  time." 

Hunter,  "Railway  Rates"  (1889),  p.  19. 

The  "cheap  trains"  act  of  1844,  tne  ^rst  parliamentary 
regulation  of  rates  in  England,  provided  that  if  after 
twenty-one  years  the  profits  exceeded  10  per  cent  the 
schedule  of  maximum  charges  might  be  revised  by  the 
Treasurer,  but  provided  that  after  such  revision  no  further 
revision  should  be  made  for  twenty-one  years,  and  also 
that  the  revision  should  be  accompanied  by  a  state  guaran- 
tee of  10  per  cent  so  long  as  the  provision  was  in  force. 

7-8  Victoria,  c.  85. 

*  For  the  history  of  the  action  in  England  as  to  state  regulation  of  rail- 
way fares  and  freights,  see  — 

Butter-worth,  "Railway  Rates  and  Traffic,"  1889. 

A  full  statement  and  history  of  the  legislation  and  action  in  respect  to 
English  railway  rates  will  also  be  found  in  an  article  by  James  Mavor,  in 
the  Quarterly  Journal  of  Economics,  April  and  May,  1894,  pp.  284,  415. 


41 


Charles  Francis  Adams,  in  tracing  the  attempt  to  regu- 
late railway  rates  in  England,  states  concisely  the  result  of 
the  elaborate  investigation  by  the  Parliamentary  Committee 
on  Railroad  Amalgamation  in  1872,  calling  special  atten- 
tion to  their  conclusion  that  periodical  revisions  of  all  rates 
and  tares  by  government  agents  was  -practically  impossible 
for  want  of  a  standard  of  revision. 

"The  Railroad  Problem,"  p.  90. 

Professor  F.  W.  Taussig,  in  his  paper,  "A  Contribution 
to  the  Theory  of  Railway  Rates,"  says  that  by  far  the 
largest  part  of  the  cost  of  performing  railway  service  is 
joint  cost,  and  declares  that  it  is  impossible  to  apportion 
railway  expense  to  any  particular  part  of  the  service  per- 
formed. He  cites  the  experiment  in  Germany,  where  an 
endeavor  has  been  made  to  base  the  tariff  upon  car  space, 
and  says,  "The  failure  of  this  supplies  the  latest  illustra- 
tion of  the  impossibility  of  fixing  rates  on  the  basis  of  the 
cost  of  the  particular  items  of  traffic." 

"  Quarterly  Journal  of  Economics,"  vol.  5,  p.  448. 

Professor  Taussig  says  that  — 

"  it  is  a  safe  conclusion  that  an  element  of  joint  cost 
appears  in  almost  every  item  of  a  railroad's  outgo,  and 
that  the  proportion  of  expense  which  can  be  specifi- 
cally assigned  to  any  one  consignment  of  freight  or 
any  one  batch  of  passengers  is  an  insignificant  fraction 
of  the  whole.  From  this  fact  of  preponderating  joint 
cost  it  follows  that  railroad  rates  are  permanently  af- 
fected by  demand,  and  that  they  cannot  be  based  on 
any  analysis  of  cost  of  service" 


42 


Report  of  Proceedings  of  the  American   Eco- 
nomic Association,  December,  1890,  p.  53. 

In  the  debate  upon  Professor  Taussig's  paper,  H.  C. 
Adams,  statistician  of  the  Interstate  Commerce  Commission 
approved  this  conclusion,  saying  that  "to  say  that  it  is  ^pos- 
sible to  assign  cost  to  a  particular  traffic  is  an  absurdity." 

Id.  p.  55. 

Professor  Dixon,  professor  of  political  economy  in  the 
University  of  Michigan,  declares  that  "little  can  be  said 
in  favor  of  the  cost  of  service  theory.  .  .  .  To  attempt 
to  fix  a  rate  on  a  particular  commodity  in  conformity  with 
the  entire  cost  of  handling  that  commodity  is  plainly  im- 
possible." 

Dixon,  "  State  Railroad  Control  "  (1896),  p.  76. 

H.  T.  Newcomb,  chief  of  the  section  of  freight  rates  in 
the  division  of  statistics  of  the  United  States  Department  of 
Agriculture,  testifying  before  the  industrial  commission  in 
March,  1899,  said,  — 

"  Rates  of  transportation  are  unjust  or  just  in  com- 
parison with  other  charges.  There  is  no  such  thing 
as  a  rate  which  is  excessive  in  itself.  The  only  study 
of  railway  charges  must  be  a  comparative  study  ;  the 
relations  among  charges  on  similar  products  and  of 
particular  charges  to  the  total  earnings  of  the  railway 
itself.  .  .  .  Each  of  our  railways  has  a  great  complex 
of  articles  that  make  up  its  traffic.  You  must  study 
the  rates  comparatively.  You  cannot  study  them 
alone.  There  is  no  such  thing  as  a  rate  that  alone  is 
excessive." 

Report  of  Industrial  Commission   (1900),  vol. 
iv.  p.  99. 


43 


Mr.  A.  B.  Stickney,  president  of  the  Chicago  &  Great 
Western  Railway  Company,  author  of  an  excellent  work 
on  railroads,  testifying  before  the  same  commission  said 
that  — 

"  the  rates  never  were  based  on  the  cost  of  carriage, 
and  never  can  be;  neither  on  the  particular  cost  nor 
on  the  average  cost." 

Id.  p.  461. 

Mr.  Stickney  says,  — 

"  //  can  be  positively  stated  that  there  is  no  means 
of  ascertaining  the  cost  of  transporting  any  particu- 
lar shipment  of  property  or  persons" 

A.    B.    Stickney,    "The    Railway    Problem" 
(1891),  p.   55. 

Professor  Sax,  author  of  the  standard  German  treatise, 
Die  Eisenbahnen,  says  that  three  fourths  of  all  railroad  ex- 
penses are  joint  cost  incurred  for  all  traffic. 

Kirkman  says  that  three  fifths  of  all  operating  expenses 
are  joint  for  passengers  and  freight. 

"Railway  Accounts,"  vol.  i.  p.  305. 

Professor  Cohn,  the  celebrated  German  political  econo- 
mist, says  that  the  true  basis  for  railway  rates  is  what  the 
traffic  will  bear,  what  the  persons  who  .are  called  upon  to 
pay  can  afford  to  pay  for  what  they  receive.  He  says  a 
railway  rate  is  precisely  like  a  government  tax,  and  should 
be  imposed  according  to  the  ability  to  pay  it.  He  says  this 
makes  it  imperative  that  the  roads  be  owned  or  the  rates 
fixed  by  the  government. 

"Die  Englische  Eisenbahnpolitic,  pp.  64,  65." 


44 


Mr.  W.  D.  Dabney,  discussing  the  rate  question,  says, — 

"The  question  of  what  rate  on  any  particular  com- 
modity, or  charge  for  any  particular  service  is  extor- 
tionate, or  what  is  reasonable,  must  evidently  be  a 
relative  one.  It  would  manifestly  be  impossible  to 
predicate  of  the  charge  for  any  particular  service  that 
it  is  unreasonable  or  the  reverse  without  a  close  exam- 
ination of  the  entire  traffic  and  field  of  operations  of 
the  road.  It  would  be  necessary  to  consider  not  only 
the  value  of  the  property  and  its  physical  characteris- 
tics, but  the  quantity  and  the  different  kinds  of  traffic 
transported  by  it,  its  situation  with  reference  to  com- 
petitive routes,  both  generally  and  at  special  points, 
and  in  general,  all  the  complicated  conditions  which 
influence  railroad  rate-makers  in  fixing  charges." 

"The  Public  Regulation  of  Railways,"  pp.  97, 
98. 

Again,  Mr.  Dabney,  in  speaking  of  classification,  says  it 

is  "  not  based  solely  or  principally  on  cost  of  service  and 

risk." 

Id.  p.  163. 

See  also  the  discussion  of  the  proposition  that  because 
the  railroads  carry  through  business  at  a  very  low  rate 
they  are  assumed  to  be  able  to  carry  local  business  at 
equally  low  rates,  which  Mr.  Dabney  says  is  the  "under- 
lying fallacy  "  of  Mr.  Hudson's  work,  "  The  Railways  and 
the  Republic." 

Id.  pp.  121  et  seq. 

Mr.  J.  Shirley  Eaton,  the  accomplished  statistician  of  the 
Lehigh  Valley  Railroad,  has  just  published  a  volume  of 


45 


over  three  hundred  pages,  in  which,  among  other  things, 
he  attempts  to  re-establish  the  long  since  exploded  theory 
that  the  charge  for  railroad  service  can  be  based  upon  its 
cost.  This  book,  however,  is,  I  think,  itself  the  best  evi- 
dence of  the  impossibility  of  ascertaining  the  cost  so  as  to 
make  it  a  practical  basis  of  rates.  Indeed,  Mr.  Eaton,  at 
the  end  of  an  elaborate  "formula  for  getting  at  the  cost  of 
freight  per  ton  mile,"  covering  four  closely  printed  pages 
of  tables  and  figures,  frankly  says,  — 

"  It  is  very  elaborately  and  carefully  worked  out, 
for  it  is  intended  to  be  a  guide  in  rate  making.  But 
let  us  only  disturb  operating  conditions  by  a  larger 
car  or  a  heavier  train,  or  let  us  get  on  one  side  or  the 
other  of  the  balance  of  traffic  movement,  or  let  the 
balance  of  movement  be  disturbed,  or  the  relative 
proportion  of  our  various  grades  of  traffic  be  disturbed 
by  general  commercial  causes  outside  of  control,  or 
let  us  deliberately  set  up  a  lot  of  causes  by  changing 
the  rates  and  our  house  of  cards  falls  to  the  ground. 

"And  further,  who  will  defend  the  reasoning  by 
which  the  undistributed  expenses  are  apportioned  to 
passenger  and  freight  service  on  the  basis  of  train 
miles? 

"Assuming  that  these  formulae  that  we  have  gotten 
are  exact,  they  are  measures  of  past  conditions.  But 
for  the  future  they  are  valuable  only  so  far  as  those 
conditions  exactly  repeat  themselves  or  continue  in 
their  original  proportion.  The  traffic  man,  even 
more  than  the  operating  man,  is  dealing  with  highly 
elastic  conditions.  He  is  dealing  with  an  organic 
thing  that  may  expand  and  grow  or  contract  and 
wither. 


46 


"The  very  thing  which  most  largely  determines 
the  cost  per  unit,  which  is  the  rate,  is  thus  held  as 
rigidly  to  a  formula  evolved  out  of  other  and  -past 
conditions  as  some  Chinese  mandarin." 

"Railroad  Operations,"  Eaton,  p.  278. 

In  the  report  of  "The  Hepburn  Committee,"  page  14, 
they  say,  — 

"Your  committee  made  an  earnest  effort  to  ascertain 
the  cost  of  transportation  and  the  relation  of  the  cost 
of  through  and  local  traffic.  The  best  information 
that  we  could  obtain  does  not  enable  us  to  suggest  the 
enactment  of  any  fixed  ratio  between  State  and  extra 
State  points,  neither  are  we  able  to  suggest  the  enact- 
ment of  any  fixed  ratio  between  different  points  within 
this  State.  A  thorough  consideration  of  all  the  evi- 
dence adduced  upon  this  subject  and  of  the  subject 
itself,  induces  the  conviction  that  the  passage  of  what 
is  popularly  termed  a  -pro  rata  freight  law  would  be 
prejudicial  to  the  interests  of  the  public.  The  experi- 
ence of  Western  States  in  this  direction  ought  to  be  a 
warning  and  a  satisfactory  reason  for  declining  to 
bring  this  subject  into  the  field  of  legislation  in  this 
State.  While  there  are  certain  general  propositions 
that  may  with  propriety  be  laid  down  by  the  legisla- 
ture for  the  control  of  traffic  managers  in  the  adjust- 
ment of  rates,  within  those  general  rules  there  must 
be  permitted  an  elasticity  of  management  and  freedom 
to  exercise  judgment  and  discretion  upon  the  ever 
varying  questions  that  constantly  present  themselves 
for  action." 


17 


Again  they  say,  — 


"The  business  of  transportation  requires  the  great- 
est freedom  of  management  of  any  business  extant. 
This  is  manifest  to  the  most  casual  observer." 

N.Y.  Leg.  Doc.  No.  38,  1880. 

Even  Mr.   Hudson,  with  all  his  prejudice  against  the 
railroads,  said  that  — 

"No  legislative  body  can  frame  a  tariff  of  rates 
without  inequality  and  injustice.  .  .  .  The  varying 
conditions  that  may  influence  rates  are  innumerable. 
It  is  a  hopeless  task  to  adjust  the  schedules  to  suit  all 
circumstances,  and  it  is  futile  to  expect  an  adequate 
reform  of  railroad  abuses  by  such  means.  The  use- 
lessness  of  attempts  to  establish  equitable  rates  by  law 
appears  in  the  fact  that  every  such  schedule  which 
has  been  in  existence  ten  years  is  now  obsolete,  being 
far  above  the  rate  now  fixed  by  the  railroads.  This 
progressive  reduction  of  the  cost  for  transportation  has 
been  cited  as  showing  that  all  regulation  of  railways 
is  unnecessary.  It  is  far  from  proving  this,  but  it 
does  -prove  that  attempts  to  prescribe  rates  by  law 
are  unnecessary  and  futile.  The  laws  of  trade  can 
bring  about  whatever  cheapening  of  the  cost  of  trans- 
portation competition  and  economy  will  produce." 

"The  Railways  and  the  Republic," J.  F.  Hud- 
son (1886),  pp.  329,  330. 

Professor  Hadley  says,  — 

"There  was  never  a  more  mistaken  idea  than  the 
idea  that  rates  would  be  reduced  if  thev  were  based 


48 


upon  the  cost  of  service.  The  principle  keeps  rates 
up.  If  it  is  strictly  applied  it  makes  it  necessary  that 
each  item  of  business  should  pay  its  share  of  the  fixed 
charges.  A  great  deal  of  business,  which  would  pay 
much  less  than  its  share  of  the  fixed  charges  (though 
still  giving  a  slight  profit  above  train  and  station 
charges)  is  thus  lost.  This  is  bad  for  the  railroads, 
bad  for  the  shipper  and  bad  for  the  prospect  of  low 
average  rates." 

Hadley,  "Railroad  Transportation"  (1885),  p. 
250. 

Professor  Seligman,  in  an  elaborate  discussion  of  rail- 
way tariffs,  says  that  — 

"the  cost  of  service  principle  is  neither  practiced  nor 
practicable.  The  attempt  to  base  rates  solely  on  cost 
is  a  pure  chimera.  Well-nigh  every  expert,  whether 
scientist,  official  or  legislator,  and  every  practical 
commission,  from  the  early  English  to  the  late  Italian 
and  American,  absolutely  discards  it  as  a  practice." 

Again  he  says  that  — 

"Actual  rates  are  mainly  fixed,  not  by  cost  of  ser- 
vice, but  by  what  the  service  is  worth.  Classification 
depends  only  in  a  subordinate  degree  upon  cost.  The 
controlling  element  is  value,  not  cost." 

"  Railway  Tariffs,  and  the  Interstate  Commerce 
Law,"  by  Edwin  R.  A.  Seligman,  Political 
Science  Quarterly,  vol.  ii.  Nos.  2,3.  [Re- 
print by  Ginn  &  Company  (1896),  pages  7, 

10.] 


49 


The  Cullom  Congressional  Committee,  after  a  most  elab- 
orate investigation  into  the  subject  of  railway  tariffs,  de- 
clared in  its  report  that  — 

"  The  movement  of  a  commodity  by  rail  is  deter- 
mined by  considerations  wholly  independent  of  and 
not  affected  by  the  cost   of  the   service   to  be   -per- 
formed" 

Cullom  Committee  Report,  p.  184. 

Mr.  E.  P.  Alexander,  in  an  article  published  in  1892, 
upon  the  long-  and  short-haul  rule,  says  that  — 

"  railroad  services  must  be  sold  rather  by  what  they 
are  worth  than  by  what  they  cost.  In  fact,  that  is  the 
general  rule  for  all  personal  services  the  world  over. 
To  begin  with  it  would  be  as  impossible  to  divide  out 
their  varied  expenses  for  management,  wear  and  tear, 
accidents,  and  the  innumerable  varieties  of  traffic,  and 
assign  a  cost  to  each  one,  as  it  would  be  for  a  doctor 
to  estimate  what  it  costs  him  to  prescribe  for  each  sep- 
arate disease  to  which  his  patients  are  liable." 

Id.  p.  199. 

For  a  discussion  of  railway  rates  from  the  granger 
standpoint,  see  the  "Railroad  Question,"  by  William  Lar- 
rabee,  late  governor  of  Iowa,  published  in  1893.  The 
author  of  this  book  frankly  admits  that  it  was  written  at 
such  odd  hours  as  he  could  snatch  from  his  time,  which 
was  largely  occupied  with  other  business,  and  it  is  through- 
out hostile  to  railroads,  but  Mr.  Larrabee  declares  that 
railroads  will  not  serve  their  real  purpose  until  they  become 
in  fact  "  highways  to  be  controlled  by  the  government  as 
thoroughly  and  effectually  as  the  common   road  or  turn- 


50 


pike,  and  the  ferry,  or  the  postoffice  and  the  custom- 
house." In  other  words,  he  is  forced  to  concede  that  the 
making  of  tariffs  by  the  state  would  necessarily  result,  and 
ought  to  result,  in  the  ownership,  or  at  least  the  entire 
management,  of  the  railroads  themselves. 

Professor  Henry  C.  Adams,  statistician  of  the  Interstate 
Commerce  Commission,  in  a  paper  read  at  the  National 
Convention  of  Railroad  Commissioners  in  1893,  says  that 
the  rule  that  specific  railway  rates  should  be  determined  by 
specific  cost  of  service  is  wholly  untenable,  and  that  the 
practice  of  charging  "what  the  traffic  will  bear,"  as  applied 
by  railroad  managers,  appears  to  be  incapable  of  defence. 
That  the  principles  that  lie  at  the  basis  of  just  railway 
schedules  arise  from  a  study  of  the  theory  of  taxation,  and 
that  — 

"  as  in  taxation  payment  for  the  support  of  govern- 
ment should  be  in  proportion  to  the  ability  of  citizens, 
so  the  contributions  of  shippers  to  the  fund  necessary 
to  meet  the  legitimate  demands  of  railways  should  be 
made  from  various  classes  of  goods  in  proportion  to 
their  ability  to  bear  the  charges." 

He  then  says  that  — 

"railway  commissioners  do  not  have  at  their  command 
the  range  of  facts  which  are  the  common  property  of 
railway  managers.  How,  then,  is  it  possible  for  com- 
missioners to  exercise  a  controlling  voice  in  railway 
management,  or  indeed  to  decide  justly  and  wisely  on 
such  questions  as  are  presented  to  them.  .  .  .  The 
question  involved  is  not  simply  commercial  in  charac- 
ter, it  is  at  the  same  time  a  question  of  public  policy, 
and  as  such,  like  all  questions  of  a  political  character, 


51 

demands  the  fullest  and  completest  knowledge  respect- 
ing it." 

Id.  pp.  134,  135. 

For  a  discussion  of  the  result  of  railway  regulation  in 
England,  see  a  paper  by  W.  M.  Acworth,  published  in 
1893,  entitled  "Government  Interference  in  English  Rail- 
way Management."  Mr.  Acworth  says  that  "government 
interference  with  freight  rates  has  resulted  in  failure  and 
disappointment." 

Id.  p.  276. 

The  Interstate  Commerce  Commission  have  approved 
the  general  principle  that  owners  of  railroads  should  be 
left  free  to  construct,  to  own,  and  to  manage  the  railroads. 
They  have  said,  — 

"  It  is  freely  conceded  that  many  practices  of  the 
carriers,  and  many  of  the  principles  adopted  by  them 
in  the  way  of  tariffs  and  classifications,  which  seem 
at  the  first  blush  to  be  purely  arbitrary  and  unjust  are 
found  on  examination  to  be  perfectly  just  and  founded 
on  the  strongest  reasons  of  public  expediency  and 
commercial  necessity.  It  is,  indeed,  almost  wonder- 
ful, considering  the  arbitrary  powers  which  the  car- 
riers (so  far  as  mere  common  law  restraints  are  con- 
cerned) possess  in  the  matter  of  rate-making,  that  the 
actual  exercise  of  arbitrary  and  oppressive  action  is 
so  comparatively  rare.  The  explanation  is  that  while 
the  restraints  of  the  common  law  count  for  little  or 
nothing,  the  operation  of  economic  and  coimnercial 
principles  is  constantly  exerting  a  pressure  which 


52 


cannot  be  resisted  in  the  actual  as  well  as  the  rela- 
tive adjustment  of  tariff  charges." 

Suggestions  of  the  Interstate  Commerce  Com- 
mission on  Senate  Bill  892,  March  16,  1892. 

Mr.  Aldace  F.  Walker,  former  member  of  the  Interstate 
Commerce  Commission,  in  his  paper  "Amendment  of  the 
Interstate  Commerce  Law,"  says,  — 

"  Experience  in  this  and  in  many  other  countries 
has  shown  the  impossibility  of  establishing  transpor- 
tation charges  by  rule  of  thumb,  or  by  any  kind  of 
procrustean  rule.  Natural  conditions  have  uniformly 
proved  too  strong  for  such  laws  to  overcome ;  and 
when  those  forces  have  produced  a  scale  of  rates  as 
phenomenally  low  as  that  which  the  American  pub- 
lic quite  generally  enjoys,  the  policy  of  attempting  to 
introduce  a  new  authority  may  be,  and  is,  very  seri- 
ously challenged. 

"  But  if  Congress  is  of  opinion  that  it  is  to  go  into 
the  business  of  making  railway  rates,  it  should  face 
the  question  deliberately,  and  confer  the  power  in  set 
terms,  leaving  nothing  to  implication,  either  as  to  the 
extent  of  authority  intended,  or  as  to  the  methods  of 
its  use.  The  rules  for  deciding  what  shall  be  a 
'reasonable  rate  '  should  be  fixed  in  the  law  ;  it  should 
afford  to  the  carriers  who  may  feel  their  just  revenues 
imperiled,  the  protection  to  which  they  are  constitu- 
tionally entitled,  by  establishing  a  right  of  appeal  to 
the  courts,  which  does  not  now  exist.  It  should  in- 
clude the  rates  of  all  common  carriers,  especially  of 
carriers  by  water.  It  should  also  confer  upon  what- 
ever body  may  be  deemed   the  trustworthy  recipient 


53 


of  the  rate-making  power  an  authority  to  raise  rates 
as  well  as  to  lower  them ;  there  is  as  much  public 
danger  in  rates  too  low  as  in  rates  too  high ;  and  the 
cases  are  frequent  in  which  the  desired  relative  ad- 
justment can  be  better  reached  by  advances  than  by 
reductions  in  tariffs." 

Id.  p.  118. 

Mr.  Kirkman,  in  a  paper  read  at  the  World's  Railroad 
Commerce  Congress  in  1893,  says  that  — 

"  the  low  railway  rates  of  America,  and  its  great  com- 
mercial prosperity,  the  result  of  government  absten- 
tion, teach  the  lesson  that  the  less  such  properties 
are  interfered  with  by  governments  the  better.  .  .  . 
The  dream  of  governmental  regulations  of  railroads 
is  a  return  to  the  practices  of  medieval  times,  when 
governments  fixed  the  price  of  bread  and  meat.  Loss 
of  confidence,  falling  off  in  production  and  enhance- 
ment of  prices,  and  general  hardships,  that  followed 
then,  will  follow  to-day  from  a  like  cause." 

"  Addresses  before  the  World's  Railway  Com- 
merce Congress,"  p.  81. 

The  English  parliamentary  commissioners,  after  years 
of  practice  under  extended  powers,  stated  to  Parliament,  in 
their  amalgamated  report,  — 

"  This  is  a  function  no  government  ought  to  under- 
take. It  involves  the  necessity  of  determining  what 
are  the  proper  expenses  of  the  companies,  and  what 
economies  they  can  practice.  These  are  matters 
which  require  the  knowledge  and  skill  and  experi- 
ence of  the  managers  themselves,   and  any  attempt 


54 

on  the  part  of  any  government  department  to  do  it 
for  them  is  impossible,  unless  the  government  is  to 
undertake  an  account  of  interference  with  the  internal 
concerns  of  the  company,  which  is  neither  desirable 
nor  practicable." 

The  railway  commissioners  for  the  state  of  Maine  re- 
ported in  1874  as  foll°ws  :  — 

"  In  the  minds  of  those  who  give  this  subject  the 
fairest  consideration,  and  possess  knowledge  enough 
of  it  to  appreciate  fully  its  difficulties,  it  becomes  a 
conviction  more  positive,  the  longer  it  is  dwelt  upon, 
that  the  only  sure  way  to  obtain  permanently  low 
rates  on  railroad  traffic  and  especially  on  freight,  is  to 
leave  the  problem  untrammeled  by  legislative  enact- 
ments to  those  -whose  special  business  it  is  to  study  out 
its  intricacies.'" 

Mr.  Schoonmaker,  formerly  member  of  the  Interstate 
Commerce  Commission,  in  an  interesting  article  upon  the 
unity  of  railways  and  railway  interests,  says, — 

"There  can  be  no  independent  rates  upon  any  road 
which  is  part  of  the  general  railway  system,  and 
inasmuch  as  there  is  no  road  which  is  not  part  of  the 
system,  all  roads  are  related  and  dependent  and  must 
substantially  conform  to  one  another." 

Further,  he  says  that  — 

"  considering  that  railways  and  their  business  are  so 
unified  both  within  state  lines  and  interstate,  there 
cannot  be  just,  uniform  and  efficient  regulation  except 
under  one  authority,  and  that  must  necessarily  be  the 
federal  authority.     As  has  been  often  said,  the  busi- 


55 

ness  of  a  railway,  whether  within  a  state  or  ink-i stair, 
is  so  blended  and  mingled,  both  in  respect  to  the 
traffic  and  the  agencies  by  which  it  is  carried,  that 
separation  for  purposes  of  regulation ,  or  even  taxa- 
tion^ is  impracticable" 

"  Compendium  of  Transportation  Theories,  Ken- 
sington Series,"  First  Book,  pp.  60,  64. 

In  his  paper,  "The  Railroads  as  one  System,"  Mr. 
Joseph  Nimmo,  Jr.,  discusses  the  causes  which  regulate 
railway  rates,  and  the  limitations  of  government  control, 
and  says,  among  other  things,  that  — 

"there  is  no  popular  fallacy  more  misleading  than 
the  assumption  that  the  railroad  managers  of  the 
country  exercise  a  very  wide  range  of  discretion  in 
the  matter  of  rate-making." 

Id.  p.  74. 

Mr.  Hendrick,  in  his  excellent  book  upon  "  Railway 
Control  by  Commissions,"  reviews  at  length  the  action  of 
the  Massachusetts  commission,  and  says  that  in  no  state 
in  the  Union  has  there  been  less  friction  between  the  rail- 
ways and  the  public,  or,  on  the  whole,  more  satisfactory 
service  by  the  railroads,  and  that,  if  the  success  of  the 
commission  can  be  attributed  to  any  one  thing,  it  is  to  the 
fact  that  the  commission  has  absolutely  no  arbitrary  power. 
He  calls  attention  to  what  is,  I  think,  little  understood,  and 
that  is  that  the  fixing  of  rates  by  the  state  will  lead  ulti- 
mately to  taking  from  the  states  the  power  to  fix  rates  at 
all.  If  the  states  fix  rates  on  state  traffic,  then  some 
power  must  fix  rates  on  interstate  traffic,  and  that  can  only 
be  the  federal  government.     And  as  the  interstate  traffic  is 


56 


the  larger  part  of  all  the  traffic,  and  is  carried  on  in  con- 
nection with  the  state  traffic,  the  necessary  result  will  be 
the  fixing  of  all  rates  by  the  federal  government. 

"Railway  Control  by  Commissioners,"  Frank 
Hendrick  (1900),  pp.  134,  135. 

*  The  United  States  Supreme  Court  has  said  that  the 
power  to  fix  rates 

"is  a  legislative  and  not  an  administrative  or  judicial 
function,  and  is  a  power  of  supreme  delicacy  and  im- 
portance. .  .  .  The  grant  of  such  a  power  is  never 
to  be  implied.  The  power  itself  is  so  vast  and  com- 
prehensive, so  largely  affecting  the  rights  of  carrier 
and  shipper  as  well  as  indirectly  of  commercial  trans- 
actions, that  no  just  rule  of  construction  would  toler- 
ate a  grant  of  such  power  by  mere  implication." 

Interstate  Commerce  Commission  v.  Cincin- 
nati &c.  Ry.,  167  U.S.  Reports,  479,  494, 
5054 

But  the  legislative  power  to  fix  rates  has  not  been  given 
to  the  commissioners  in  Massachusetts,  and  it  necessarily 

*  For  a  practical  discussion  of  the  difficulty  in  properly  fixing  rates 
and  the  proper  method  of  making  railroad  tariffs,  see  "American  Rail- 
roads as  Investments,"  by  Van  Oss  (1893),  pp.  82  et  seq. 

Professor  Le  Rossignol  in  his  recent  work  says,  — 

"  It  has  come  to  pass  that  there  is  a  classification  of  freight  based 
on  value  and  not  on  weight,  and  the  rates  are  based  not  on  the  cost 
of  service  but  on  what  the  traffic  will  bear.  That  this  is  a  correct 
principle  in  theory  can  hardly  be  doubted.'1'' 

"Monopolies,  Past  and  Present"  (1901),  p.  164. 

t  A  full  statement  of  the  statutes  of  the  various  states  as  to  fixing  or 
supervising  railroad  rates  will  be  found  in  the  opinion  in  this  case. 


57 


follows  that  their  power  to  pass  upon  the  reasonableness  of 
a  particular  rate  is  only  a  power  to  compare  that  rate  with 
other  existing  rates.  To  say  that  a  rate  is  reasonable  or 
unreasonable  without  reference  to  other  rates  for  similar 
services,  as,  for  instance,  upon  the  basis  of  cost  or  of  value 
of  the  particular  service,  is  to  make  a  rate  for  that  service. 

The  answer  to  the  claim  that  the  commission  can  con- 
sider the  cost  or  value  of  a  particular  service  and  say  what 
is  a  proper  rate  for  that  service  upon  that  basis,  is  that  to 
do  this  would  be  to  make  rates. 

To  say  that  the  commission  may  fix  a  charge  for  one 
service  upon  the  basis  of  the  cost  or  value  of  that  service 
alone  is  to  say  that  it  may  fix  the  charge  for  all  services 
upon  the  same  basis.  Indeed,  if  the  commission  should 
assume  to  thus  make  a  rate  for  one  service,  it  would  be  its 
duty,  when  requested,  to  make  rates  for  all  other  services 
in  the  same  manner,  and  it  would  thus  find  itself  making 
the  entire  tariff. 

1  submit,  therefore,  with  entire  confidence,  that  even  if 
the  cost  or  value  of  a  service  could  be  ascertained,  the 
commissioners  could  not,  under  the  provisions  of  the  statute, 
decide  that  the  charge  for  the  service  was  reasonable  or 
unreasonable  upon  that  basis. 

In  conclusion,  I  beg  to  suggest  that  this  case  must  of 
necessity  rest  upon  a  comparison  of  the  rate  with  other  ex- 
isting rates. 

The  application  is  in  behalf  of  the  stations  in  Brockton 
only,  but  no  reason  is  given  by  the  petitioners  why,  if  a 
reduction  is  proper  in  the  rate  to  Brockton,  a  similar  re- 
duction should  not  be  made  to  all  the  places  in  the  Brock- 
ton group.  Coal  rates  to  all  these  places  have  been  uni- 
form for  many  years,  and  the  existing  rate  was  fixed  for 


58 

them  all  in  1899.  The  petitioners  then  said,  and  they 
now  admit,  that  if  a  reduction  is  made  in  the  Brockton 
rate  it  must  also  be  made  in  the  rate  to  all  points  in  the 
group. 

Testimony  of  E.  C.  Packard,  pp.  356,  357. 

Such  a  reduction  as  is  asked  for  Brockton  would,  upon 
the  present  tonnage  of  the  Brockton  group,  amount  to  a 
reduction  of  $40,104.25  in  gross  revenue  each  twelve 
months.  This  would  be  the  reduction  from  the  present 
rates  applied  to  the  -present  tonnage,  but  it  would  be  a  re- 
duction from  the  revenue  upon  the  same  tonnage  at  the 
rate  which  existed  until  1897  of  $80,208.50. 

A  similar  reduction  from  the  present  coal  rates  of  the 
whole  New  Haven  road  would  amount  to  $877,688.31  a 
year. 

A  similar  reduction  from  the  present  freight  rates  on  all 
the  freight  business  of  the  road  would  amount  to  $6,721,- 
384.45  a  year,  or  $2,400,306.45  more  than  the  yearly 
dividend  upon  the  entire  capital  of  the  company. 

During  the  last  four  years  a  reduction  has  been  made  in 
the  coal  rates  to  the  Brockton  group,  which,  if  applied  to 
the  entire  coal  business  of  the  company,  would  have  made 
a  reduction  in  annual  revenue  of  $658,266.21. 

A  similar  reduction  in  all  the  freight  rates  of  the  road 
would  have  made  a  reduction  in  annual  revenue  of  $5,041,- 
188.34,  or  $800,010.34  more  than  the  annual  dividend. 

If  the  reduction  which  has  been  made,  and  the  reduc- 
tion which  is  now  asked  in  the  Brockton  coal  rate  had 
been  made,  and  were  to  be  made  in  the  coal  rates  of  the 
whole  road,  the  reduction  in  annual  revenue  would  be 
$1,316,532.46, 


;,!» 


A  similar  reduction  upon  all  the  freight  business  of  the 
company  would  amount  to  $1 0,082 ,376. 68  or  $j,8ji,- 
00S.6S  more  than  the  annual  dividend,  and  $1  ,j 74,840.80 
more  than  the  dividend  and  the  rentals  of  all  the  leased 
lines. 

It  is  obvious  that  no  such  general  reduction  in  rates  can 
be  made.  The  petitioners'  claim  for  a  reduction  in  rate 
therefore  necessarily  rests  upon  the  claim  that  the  coal  rate 
of  the  Brockton  group  is  largely  in  excess  of  other  rates 
for  similar  service. 

With  this  discussion  as  to  the  standard  by  which  the 
rate  which  is  complained  of  as  excessive  and  the  rate 
which  you  are  asked  to  recommend  as  reasonable  are  to 
be  judged,  we  come  next  to  the  consideration  of  the  state  of 
affairs  to  which  the  complaint  applies.     It  is  briefly  this  : 

For  many  years  before  1897  the  city  of  Brockton  (in- 
cluding the  three  stations  of  Brockton,  Campello,  and 
Montello),  and  about  thirty  other  places  in  that  part  of  the 
state,  had  a  uniform  rate  for  the  transportation  of  coal 
from  Fall  River,  New  Bedford,  and  Providence,  that  is, 
from  the  tide-water  points  from  which  they  obtained  coal, 
of  $1  a  ton.  These  places  were  known,  and  may  be  con- 
veniently referred  to  in  this  discussion,  as  the  "Brockton 
group." 

No  complaint  had  been  made  of  the  dollar  rate  up  to  the 
latter  part  of  1897.  Apparently  no  injury  had  been  suf- 
fered, by  Brockton  at  least,  from  that  rate,  because  during 
the  time  that  it  existed  Brockton  had  increased  both  in 
population  and  in  valuation  more  than  twice  as  fast  as 
Plymouth  county  taken  as  a  whole,  and  more  than  twice 
as  fast  as  the  entire  commonwealth.  Its  railroad  service 
had  also  during  the  same  time  correspondingly  increased, 
and  no  complaint  had  been  made,  or  is  now  made,  in  re- 


60 


spect  to  that  service.  Brockton  has  now  fourteen  express 
passenger  trains  and  thirty-six  local  trains  daily  between 
Brockton  and  Boston,  and  it  has  thirty-two  passenger 
trains  daily  between  Brockton  and  points  south.  There 
are  also  six  freight  trains  between  Brockton  and  Boston, 
six  between  Brockton  and  Middleborough,  four  between 
Brockton  and  Cape  Cod,  two  between  Brockton  and  Fall 
River  and  New  York,  and  two  between  Brockton  and 
Washington  and  the  West  via  Harlem  River  each  day.  I 
think  it  may  fairly  be  said  that  no  place  in  the  state  of  the 
same  size  has  more  ample  and  efficient  railroad  service 
than  Brockton. 

Large  expenses  have  been  incurred  by  the  railroad  com- 
pany for  the  accommodation  of  the  Brockton  business.  Be- 
tween 1894  and  1898  $2,214,411.53  were  expended  in 
the  abolition  of  grade  crossings  in  Brockton  upon  the  peti- 
tion of  the  city  authorities.  Of  this  the  railroad  company 
paid  $1,439,367.50,  and  it  also  expended  considerable 
sums  for  land  and  other  railroad  accommodations  in 
Brockton,  making  its  total  expenditure  in  that  city  during 
those  four  or  five  years  probably  over  a  million  and  a  half 
of  dollars. 

In  addition  to  this,  Brockton,  in  common  with  the  other 
points  on  the  Old  Colony  system  in  southeastern  Massa- 
chusetts, has  received  since  January,  1894,  the  benefit  of 
the  abolition  of  what  was  known  as  the  Old  Colony  arbi- 
trary, that  is,  the  local  Old  Colony  rate,  which  was  added 
to  the  through  rates  before  the  lease  to  the  New  Haven. 
The  benefit  of  this  appears  from  the  fact  that  during  the 
year  ending  September  30,  1898,  9236  tons  of  freight  to 
Brockton,  Montello,  and  Campello  were  carried  at  the 
Boston  rate  for  $11,117  ^ess  tnan  they  would  have  been 
carried  under  conditions  existing  before  the  lease,  that  is, 


(51 


when  the  Old  Colony  local  rate  or  arbitrary  was  added  to 
the  through  rate. 

See  Report  of  1899  Hearing,  p.  212. 

Brockton  itself  has  also  another  special  advantage  in 
its  freight  business,  arising  from  a  special  or  "  commodity  " 
rate,  which  has  been  made  for  the  peculiar  products  of 
Brockton,  that  is,  boots,  shoes,  leather,  shoe  findings,  etc. 
These  products  are,  under  the  official  classification,  rated 
as  first  class  at  eleven  cents  per  hundred  pounds.  Under 
the  special  or  commodity  tariff  given  to  them  for  Brock- 
ton they  are  rated  at  seven  cents.  The  advantage  of  this 
to  Brockton  is  very  great,  because  a  large  part  of  their 
business  is  done  under  this  special  rate.  It  appeared  at 
the  hearing  in  1899  that  the  percentage  of  freight  done 
under  this  special  rate  was  37  per  cent  of  the  whole  Brock- 
ton business. 

Report  of  1899  Hearing,  p.  214. 

The  following  table  of  tonnage  and  classification  for 
April  and  October,  1900,  being  two  months,  which  I  be- 
lieve may  fairly  be  taken  to  indicate  the  general  charac- 
ter of  the  Brockton  business,  shows  that  43  per  cent  of  the 
entire  Brockton  business  done  under  class  rates  is  now 
done  under  the  special  seven-cent  rate  instead  of  under 
the  eleven-cent  rate  of  the  first  class  of  the  official  classifi- 
cation :  — 


02 


Statement  of  Tonnage  and  Classification  Done 
Under  Class  Rates  Between  Boston  and  Mon- 
tello,  Brockton,  Campello,  for  the  Months  of 
April  and  October,  1900,  in  tons. 


Higher 

than 

Class 

1 

1 

2 

3 

4 

5 

6 

Special 

Total 

Rate 

IIC. 

9c. 

8c. 

6c. 

5c 

4c. 

7c. 

Tons 

170 

960 

671 

1029 

1 805 

1573 

1093 

5480 

12,781 

Prop'n 
Each  Class 

1% 

8% 

5% 

8% 

H% 

12% 

9% 

43% 

100% 

The  effect  of  this  special  class  rate  enables  Brockton  man- 
ufacturers, instead  of  billing  from  the  South  and  West  by  a 
through  bill  under  the  official  classification,  or  otherwise,  to 
use  the  low  special  rate  of  seven  cents  upon  a  large  part  of 
their  business,  and  send  their  products  between  Brockton 
and  Boston,  and  thus  avail  themselves  of  competitive  rates 
between  Boston  and  all  points  to  the  South  and  West.  In 
other  words,  the  giving  this  special  rate  to  Brockton  for 
its  peculiar  products,  amounting  to  over  40  per  cent  of  its 
entire  business,  enables  Brockton  to  use  from  Boston  lines 
in  competition  with  the  New  Haven  and  its  connections  to 
all  points.  The  result  is  that  the  New  Haven,  instead  of 
getting  the  long  haul  over  its  own  line  for  those  products, 
gets  only  the  short  haul  of  twenty  miles  at  the  low  special 
rate,  and  Brockton  is  thus  made  a  competitive  point  at  the 
expense  of  the  New  Haven  for  a  large  part  of  the  Brock- 
ton business. 

In  the  latter  part  of  1897  application  was  made  by  sub- 
stantially the  same  petitioners  who  are  now  before  the 
board  to  the  company,  and  informally  to  the  board  of  rail- 
road commissioners,  for  a  reduction  of  the  dollar  rate  to 
Brockton  on  coal.  None  of  the  other  places  in  the  Brock- 
ton group  called  for  such  reduction. 


«3 


February  i,  1898,  the  coal  rate  was  reduced  from  one 
dollar  to  eighty-five  cents  a  ton  for  all  places  in  the  Brock- 
ton group. 

March  21,  1898,  a  petitiorf  was  filed  by  James  J.  Dowd, 
E.  B.  Mellen,  and  three  others,  as  a  sub-committee,  on 
behalf  of  the  board  of  trade,  the  city  government,  and 
the  Commercial  Club  of  Brockton,  asking  the  board  to 
recommend  a  reduction  in  the  coal  rate  and  in  the  Ideal 
freight   tariff. 

May  12,  1898,  upon  suggestion  of  the  board,  I  think, 
the  petitioners  specified  their  request,  and  asked  that  the 
coal  rate  be  reduced  from  eighty-five  cents  to  fifty  cents  a 
ton,  the  first-class  rate  from  eleven  cents  a  hundred  pounds 
to  eight  cents,  and  the  second-class  rate  from  nine  cents  to 
seven  cents  a  hundred  pounds. 

June  8,  1898,  a  hearing  upon  this  application  was 
opened  before  the  board  of  railroad  commissioners.  This 
hearing  continued  at  various  times  until  February  16,  1899, 
when,  as  the  result  of  negotiations  between  the  counsel  for 
the  railroad  company  and  the  petitioners,  the  coal  rate  was 
reduced  to  seventy-five  cents  a  ton,  and  the  further  prose- 
cution of  the  petition  was  abandoned.  The  result  was 
stated  to  the  board  by  Mr.  Dowd  as  follows :  — 

*  Mr.  Chairman  :  The  matter  of  freight  rates  on 
the  New  York,  New  Haven  &  Hartford  Railroad  from 
Brockton  has  been  amicably  arranged  between  Col. 
Benton  and  myself,  and  it  will  not  be  necessary  to 
have  any  further  hearings  before  this  Commission. 
Mr.  Benton  has  consented  to  modify  the  rates  as 
charged  to  the  satisfaction  of  the  Brockton  people  and 
we  feel  grateful  to  the  Commission  for  the  attention 
that  they  have  given  us,  and  I  think  that  perhaps  a 


64 


little  gratitude  is  due  to  Mr.  Benton  and  myself  for  the 
fact  that  we  have  relieved  the  Commission  from  a  very 
arduous  duty  of  striving  to  fix  a  rate,  but  we  felt  that 
if  the  matter  went  to  the  Commission  they  would  do 
the  best  they  could  for  Brockton  and  I  think  Mr.  Ben- 
ton's idea  was  that  the  Commission  might  possibly 
see  something  in  the  evidence  we  presented  and  he 
wisely  and  generously  gave  us  substantially  what  we 
ask,  with  regard  particularly  to  the  coal  rate. 

"The  other  matters  were  left  open  for  the  time  be- 
ing, with  no  promise  or  qualifications  made  whatever, 
and  Mr.  Benton  went  further  and  said  in  time  to  come 
if  he  knew  that  the  company  could  do  better  on  the 
coal  rate  they  would  do  so.  The  rate  which  they  give 
us  is  seventy-five  cents  a  ton  from  the  different  points, 
with  the  possibility  that  in  the  course  of  the  year  that 
might  be  reduced  still  lower ;  so  that  we  are  compar- 
atively satisfied  for  the  time  being  ;  it  makes  quite  a 
difference.  And  then  again  it  necessitates  the  appli- 
cation of  that  rate  to  the  thirty-two  towns  included 
with  Brockton,  which  after  all  makes  quite  an  imme- 
diate loss  to  the  railroad  company ;  and  while  we 
wanted  a  better  rate  than  that,  still  we  appreciated  the 
fact  that  the  company  possibly  could  not  afford  to  lose 
any  more  than  that  on  one  commodity." 

The  stenographic  report  of  the  hearing  at  that  time  cov- 
ered 313  typewritten  pages,  and  is,  by  agreement  in  this 
case,  before  you  for  examination. 

The  claim  of  the  petitioners  at  that  time  was,  as  is  usual 
in  these  cases,  that  the  reduction  in  rate  would  produce  an 
increase  in  business  so  that  the  company  would  receive  as 
much  revenue  and  profit  at  the  lower  rate  as  at  the  higher. 


65 


The  petitioners  then  said,  as  they  ordinarily  say  in  these 
cases,  "  We  do  not  ask  that  the  revenues  of  the  company  be 
reduced,  but  we  believe  that  the  lower  rate  for  which  we 
ask  will  produce  at  least  as  much,  and  probably  more 
revenue  than  the  higher  rate." 

This  claim  requires  examination,  for  the  first  question,  in 
considering  a  reduction  of  rates,  is  obviously  whether  the 
business  to  which  the  rate  applies  is  such  that  it  will  re- 
spond to  a  decreased  rate  with  an  increased  volume  of 
business. 

For  this  purpose  a  table  has  been  carefully  prepared, 
which  is  found  at  page  255  of  the  stenographic  report, 
showing  the  tonnage  and  revenue  to  each  point  in  the 
Brockton  group,  for  seven  years,  from  February  1,  1894, 
to  February  1,  1901.  This  period  includes  four  years  at 
the  dollar  rate,  one  year  at  the  85-cent  rate,  and  two  at 
the  75-cent  rate.  From  this  table  it  appears  that  during 
the  year  from  February  1,  1897,  to  February  1,  1898,  the 
coal  tonnage  to  the  Brockton  group  was  128,929  gross 
tons,  and  the  revenue  $128,929. 

During  the  following  year,  ending  February  1,  1899, 
the  tonnage  was  141,407  gross  tons,  being  an  increase  of 
12,478  tons,  or  9.67  per  cent,  but  the  rate  was  85  cents  a 
ton,  so  that  the  revenue,  instead  of  being  $141,407,  was 
$120,195.95,  being  a  decrease  of  $8733.05,  or  6.77  per 
cent  of  the  entire  revenue ;  that  is  to  say,  during  this  year 
the  railroad  company  carried  12,478  tons  more  than  dur- 
ing the  previous  year  for  $8733.05  less  compensation. 
During  the  following  year,  from  February  9,  1899,  to 
February  1,  1900,  the  total  tonnage  was  162,355  gross 
tons,  being  an  increase  of  20,948  tons,  or  14.82  per  cent. 
But  this  tonnage  was  carried  at  75  cents  a  ton,  and  al- 
though the  increase  of  tonnage  was  20,948  tons,  or  14.82 


66 


per  cent,  the  revenue  at  the  75-cent  rate  only  increased 
$1570.30,  or  1. 31  per  cent.  And  the  amount  received  for 
the  carriage  of  the  162,555  tons  in  1899  at  the  75-cent  rate 
was  $ j  162.  j 5  less  than  the  amount  received  for  carrying 
the  128,926  tons  in  1897. 

The  net  result  was  that  in  1899  the  company  carried 
33^426  tons,  or  25.92  per  cent  more  tonnage  than  it  did  in 
1897,  two  years  previously,  for  $7162.73,  or  5.55  per 
cent,  less  revenue. 

It  is  obvious,  however,  that  the  full  effect  of  the  75-cent 
rate,  or  the  reduction  from  $1  to  75  cents  could  not  be  ascer- 
tained by  the  result  of  a  single  year's  business,  and  there- 
fore I  have  made  the  comparison  for  the  year  from  Febru- 
ary 1,  1900,  to  February  1,  1901.  During  that  year  the 
total  tonnage  to  the  Brockton  group  decreased  from  162,- 
355  gross  tons  t0  160,417  tons,  a  decrease  of  1938  tons,  or 
between  1  and  2  per  cent,  and  the  revenue  decreased  from 
$121,766.25  in  the  previous  year  to  $120,312.75,  a  decrease 
of  $1453-50,  and  a"  decrease  from  the  revenue  in  1897  of 
$8616.25. 

The  net  result,  then,  for  the  last  year  has  been  that  the 
company  carried  51,488  gross  tons  more  than  it  did  in 
1897,  for  $8616.25  less  revenue. 

If,  therefore,  we  assume  that  all  increase  of  tonnage 
since  1897  has  been  the  result  of  the  successive  reductions 
in  rate,  we  find  that  the  company  is  still,  although  carrying 
a  larger  tonnage,  receiving  a  much  less  revenue. 

But  has  the  increase  in  tonnage  resulted  from  the  reduc- 
tion of  rates?  To  ascertain  this  we  properly  look  to  see 
whether  the  tonnage  increased  when  the  rate  was  uniform, 
and  we  find  that  the  tonnage  increased  and  decreased  under 
the  uniform  dollar  rate  substantially  as  it  did  under  the  suc- 
cessively reduced  rates  of  85  cents  and  75  cents. 


67 


From  February,  1894,  to  February  1,  1895,  the  coal  ton- 
nage of  the  Brockton  group  under  the  dollar  rate  was 
120,470  gross  tons. 

In  the  next  year,  from  February  1,  1895,  to  February  1, 
1896,  the  coal  tonnage  of  the  Brockton  group  had  in- 
creased to  142,954  tons,  under  the  same  rate  of  a  dollar. 

But  in  the  next  year,  from  February  1,  1896,  to  Febru- 
ary 1,  1897,  the  tonnage  decreased  under  the  same  rate  to 
125,130  tons,  which,  although  less  than  the  preceding  year, 
was  about  5000  tons  greater  than  the  tonnage  from  Febru- 
ary 1,  1894,  to  February  1,  1895. 

This  is  the  result  of  investigation  as  to  the  business  of 
the  entire  "  Brockton  group."  An  investigation  as  to  the 
Brockton,  Campello,  and  Montello  stations  alone  gives  the 
following  result :  — 

From  February  1,  1897,  to  February  1,  1898,  the  coal 
rate  to  these  three  stations  was  $1  per  gross  ton.  The 
total  tonnage  for  the  same  time  was  65,786  gross  tons,  and 
the  revenue  was  $65,786. 

February  1,  1898,  a  reduction  of  15  per  cent  was  made, 
and  from  that  time  to  February  1,  1899,  the  rate  was  85 
cents  per  gross  ton.  The  result  was  an  increase  of  tonnage 
to  70,977  gross  tons,  being  an  increase  in  tonnage  of  5 191 
tons,  or  7.89  per  cent.  But  the  revenue  decreased  to 
$60,330.45,  being  a  decrease  of  $5455-55  •  or  8-29  Per 
cent  of  the  entire  revenue. 

February  9,  1899,  a  further  reduction  was  made,  from 
85  cents  to  75  cents  a  ton,  and  for  the  next  year,  ending 
February  1,  1900,  the  rate  to  these  three  stations  was  75 
cents  a  ton.  The  result  was  an  increase  of  tonnage  to 
81,400  gross  tons,  being  an  increase  of  10,432  tons,  or 
14.69  per  cent,  and  an  increase  of  revenue  over  that  de- 


68 


rived  from  the  85-cent  rate  of  the  previous  year  of  $726.30, 
or  1.23  per  cent. 

But  the  revenue  received  for  the  carriage  of  the  81,4.00 
tons  between  February  9,  1899,  and  February  1,  1900,  at 
the  75-cent  rate  was  less  than  the  revenue  derived  from 
carrying  the  65,786  tons  from  February  1,  1897,  to  Febru- 
ary 1,  1898,  by  $4729.25,  or  7.18  per  cent. 

The  net  result  was  that  in  1899  the  company  carried  to 
these  three  stations  15,623  tons,  or  23.74.  Per  cen^  more 
tonnage  than  it  did  in  1897,  two  years  previous,  for 
$4720.25,  or  j. 18  -per  cent,  less  revenue. 

Coming  to  the  last  year,  we  find  that  from  February  1, 
1900,  to  February  1,  1901,  the  total  coal  tonnage  to  the 
three  Brockton  stations  decreased  from  81,409  tons  for 
the  previous  year  to  80,494  tons,  being  915  tons,  or 
between  1  and  2  per  cent  less  than  the  previous  year. 
This,  it  will  be  observed,  compares  the  last  year  of  full 
days  with  the  previous  year  of  eight  days  short,  which 
would  make  the  difference  probably  somewhat  more. 

But  the  revenue  for  this  business  decreased  from 
$61,056.75  to  $60,370.50,  being  a  decrease  of  $686.25 
from  the  revenue  of  the  previous  year;  that  is  to  say,  un- 
der the  75-cent  rate  the  business  of  the  last  year  was  less 
than  the  business  of  the  year  before. 

The  net  result,  then,  for  the  last  year  has  been  that  the 
company  carried  to  the  three  Brockton  stations  14,708 
gross  tons  more  than  it  did  in  1897,  for  $5415.50  less 
revenue. 

To  ascertain  whether  the  increase  in  tonnage  to  the  three 
Brockton  stations  has  resulted  from  the  reductions  in  rates, 
I  have  looked  to  see  whether  the  coal  tonnage  of  these  sta- 
tions increased  under  the  uniform  dollar  rate.    This  exam- 


69 


ination  shows  that  the  coal  tonnage  of  the  three  Brockton 
stations  from  February,  1894,  to  February,  1895,  under 
the  dollar  rate  was  58,303  tons. 

In  the  next  year,  from  February  1,  1895,  to  February  1, 
1896,  the  coal  tonnage  of  the  Brockton  stations  increased  to 
70,913  tons  under  the  same  rate,  while  in  the  next  year, 
from  February  1,  1896,  to  February  1,  1897,  the  tonnage 
decreased  under  the  dollar  rate  to  61,331  tons,  which,  al- 
though less  than  the  previous  year,  was  more  than  that  of 
the  years  1894  and  1895. 

Again,  it  appears  from  information  already  given  that  the 
tonnage  to  the  three  Brockton  stations  for  the  twelve  months 
ending  June  30,  1894,  was  54,119  tons,  and  that  the  ton- 
nage for  the  twelve  months  ending  June  30,  1895,  was 
57,596  tons. 

The  following  table  shows  the  increase  and  decrease  of 
tonnage  and  revenue  of  the  "Brockton  group"  with  the 
Brockton  stations,  of  the  Brockton  stations  alone,  and  of  the 
"Brockton  group"  excluding  the  Brockton  stations  for  the 
seven  years  from  1894  to  1901,  and  gives  percentage  of 
increase  and  decrease  of  revenue  for  each  class  each  year. 
It  is  made  from  the  table  found  on  page  254  of  the  steno- 
graphic report,  and  shows  the  similarity  of  the  fluctuations 
in  tonnage  and  revenue  in  each  class  :  — 


70 


Entire 
Group. 

18.66% 

18.66 

3.86 

3.86 

12.46 

12.46 

7.02 

7.02 

9.81 

9.81 

3  03 

3-03 


17-37 
.22 

1.08 
iS-9i 

13.00 

3-94 
9.67 
6.77 
34-76 
1.08 

13-57 

14.82 

29.74 

2.68 

25-94 

5-55 
14.82 

"•3« 

33-15 
•13 

12.21 

15-83 
28.2 

3-85 

24.42 

6-37 

*3-44 

.09 

1. 19 

1. 19 


Montello, 
Brockton, 
Campello. 

21.62% 

21.62 

5-19 

5-i9 

i3-5i 

i3-5i 

12.83 

12.83 

7.22 

7.22 

7.26 

7.26 


Ent.  Group, 
excluding 
Montello, 
Brockton, 
Campello. 

15.88% 

15.88 

2.62 

2.62 

II.44 

II.44 

I.56 

I.56 

12-35 

12-35 


Tons  inc.  1895  ($1.00)   over   1894  ($1.00 
Rev.     "     1895  ($1.00)      "      1894  ($1.00 
Tons  inc.  1896  ($1.00)      "      1894  ($1.00 
Rev.     "     1896  ($1.00)      "      1894  ($1.00 
Tons  dec.  1896  ($1.00)  under  1895  ($1.00 
Rev.     "     1896  ($1.00)      "      1895  ($1.00 
Tons  inc.  1897  ($1.00)   over    1894  ($1.00 
Rev.     "     1897  ($1.00)      "      1894  ($1.00 
Tons  dec.  1897  ($1.00)  under  1895  ($1.00 
Rev.     "     1897  ($1.00)      "      1895  ($1.00 
Tons  inc.  1897  ($1.00)   over    1896  ($1.00 
Rev.     "     1897  ($1.00)      "       1896  ($1.00 
Tons  dec.  1897  ($1.00)  under  1896  ($1.00 
Rev.     "     1897  ($1.00)      "      1896  ($1.00 
Tons  inc.  1898  ($0.85)   over    1894  ($1.00 
Rev.  dec.  1898  ($0.85)  under  1894  ($1.00 
Rev.  inc.  1898  ($0.85)   over    1894  ($1.00 
Tons  dec.  1898  ($0.85)  under  1895  ($1.00 
Rev.     "     1898  ($0.85)      "      1895  ($1.00 
Tons  inc.  1898  ($0.85)   over    1895  ($1.00 
Tons  inc.  1898  ($0.85)      "      1896  ($1.00 
Rev.  dec.  1898  ($0.85)  under  1896  ($1.00 
Tons  inc.  1898  ($0.85)   over    1897  ($1.00 
Rev.  dec.  1898  ($0.85)  under  1897  ($1.00 
Tons  inc.  1899  ($0.75)    over    1894  ($1.00 
Rev.     "     1899  ($0.75)      "      1894  ($1.00 
Rev.  dec.  1899  ($0.75)  under  1894  ($1.00 
Tons  inc.  1899  ($0.75)   over    1895  ($1.00 
Rev.  dec.  1899  ($0.75)  under  1895  ($1.00 
Tons  inc.  1899  ($0.75)   over    1896  ($1.00 
Rev.  dec.  1899  ($0.75)  under  1896  ($1.00 
Tons  inc.  1899  ($0.75)   over    1897  ($1.00 
Rev.  dec.  1899  ($0.75)  under  1897  ($1.00 
Tons  inc.  1899  ($0.75)    over    1898  ($0.85 
Rev.     "     1899  ($0.75)      "      1898  ($0.85 
Tons  inc.  1900  ($0.75)      "      1894  ($1.00 
Rev.  dec.  1900  ($0.75)  under  1894  ($1.00 
Rev.  inc.  1900  ($0.75)   over    1894  ($1.00 
Tons     "    1900  ($0.75)      "      1895  ($1.00 
Rev.  dec.  1900  ($0.75)  under  1895  ($1.00 
Tons  inc.  1900  ($0.75)    over    1896  ($1.00 
Rev.  dec.  1900  ($0.75)  under  1896  ($1.00 
Tons  inc.  1900  ($0.75)   over    1897  ($1.00 
Rev.  dec.  1900  ($0.75)  under  1897  ($1.00 
Tons  inc.  1900  ($0.75)   over    1898  ($0.85 
Rev.    "     1900  ($0.75)      "      1898  ($0.85 
Tons  dec.  1900  ($0.75)  under  1899  ($0.75 
Rev.    "     1900  ($0.75)      "      1899  ($0.75 

We  are  thus  led  to  the  conclusion,  so  far  as  the  business 
of  the  Brockton  group  or  of  the  Brockton  stations  is  con- 
cerned, that  the  increase  in  tonnage  has  not  resulted  from 


2i-73 

3-47 

i3-5i 
.09 

'5-72 
1.63 
7.89 
8.29 

39-63 

4.72 

14.80 
13.89 
32-73 
•44 
23-74 

7.18 
14.69 

1.23 
38.06 

3-54 
i3-5i 
14.86 
31.24 

1.56 

22.35 
8.23 

!3-4i 
.06 

1. 12 
1. 12 


1.02 

1.02 

13.29 

3-7o 

2.23 
16.90 

10.39 
6.16 

"•54 
5-4° 

30.20 

2-34 
12.36 

I5-72 
26.87 

3.84 
28.20 

4- 
H-93 

1.41 

28.57 
3-57 

10.94 

16.79 

25.27 

6.04 

26.57 
5.06 

13-47 
.1 

1.26 
1.26 


71 


the  reduction  in  rates,  but  has  apparently  been  quite  inde- 
pendent of  the  rates.  This  is  doubtless  because  the  cost  of 
coal,  as  compared  with  the  other  total  expenses  of  the  busi- 
ness, either  of  the  Brockton  group  or  of  the  Brockton  sta- 
tions, is  very  small,  so  that  a  reduction  in  the  rate  of  the  coal 
cuts  no  figure  in  the  growth  or  lack  of  growth  of  the  man- 
ufacturing industries.  This  is  still  further  shown  by  the 
business  in  other  groups. 

We  find  the  same  result  in  the  business  of  another  ad- 
joining, but  smaller,  group  of  towns.  Harrison  Square, 
Milton,  Neponset,  East  Milton,  West  Quincy,  Quincy, 
Quincy  Adams,  and  Braintree  form  a  group  in  which  the 
rate  for  1896  and  1897  was  a  dollar.  In  1898  it  was  re- 
duced to  90  cents,  at  which  rate  it  has  since  remained. 

Under  the  dollar  rate  the  tonnage  in  1896  was  1634  tons. 
In  1897  it  decreased  to  1057  tons  at  the  same  rate.  The 
rate  was  reduced  the  next  year  to  90  cents  and  the  tonnage 
decreased  to  976  tons.  In  the  next  year,  1899,  tne  tonnage 
increased  under  the  same  90-cent  rate  to  1551  tons,  and 
during  the  last  year,  at  the  same  rate,  the  tonnage  has  been 
1520  tons. 

In  other  words,  during  the  three  years  of  the  90-cent  rate 
the  tonnage  first  fell  off,  then  increased,  then  slightly  de- 
creased, and  has  not  yet  quite  reached  the  tonnage  under 
the  dollar  rate  in  1896. 

The  three  stations  of  Randolph,  North  Stoughton,  and 
South  Stoughton  have  had  a  rate  in  1897  of  one  dollar, 
1898  of  90  cents,  1899,  two  months  at  90  cents,  ten  months 
at  80  cents,  and  1900  at  80  cents. 

The  tonnage  in  1897  at  the  dollar  rate  was  51 17  tons. 
The  tonnage  in  1898  under  a  rate  10  per  cent  less  was 
5304  tons.     The  tonnage  in  1899,  under  a  rate  practically 


20  per  cent  less  than  in  1897  was  61 21  tons,  and  the  ton- 
nage in  1900  at  the  80-cent  rate  was  6174  tons-  That  is  to 
say,  a  reduction  in  1898  of  10  per  cent  in  the  rate  was  fol- 
lowed by  an  increase  of  only  about  3^  per  cent  in  the  ton- 
nage, and  a  further  reduction  of  10  per  cent  in  the  rate  in 
1899  and  1900  resulted  in  only  about  16  per  cent  increase 
of  tonnage  over  the  tonnage  of  1897. 

The  argument  for  the  reduction  of  rates  is  that  the  in- 
creased tonnage  will  give  an  equivalent  revenue  at  the  re- 
duced rate.  The  investigation  shows  that  has  not  been  the 
case  either  in  the  Brockton  group  or  in  the  Brockton  sta- 
tions or  in  the  adjoining  groups.  Tonnage  has  increased, 
revenue  has  decreased ;  and  when  we  come  to  examine  into 
the  question  of  what  caused  the  increase  of  tonnage,  we 
find  that  it  was  not  the  reduction  of  rates,  because  the  ton- 
nage increased  proportionately  and  practically  in  the  same 
way  under  the  old  rate.  This,  as  I  have  before  stated,  is 
doubtless  due  to  the  fact  that  the  cost  of  coal  is  a  very  un- 
important factor  in  the  business  of  the  Brockton  group  of 
towns  or  the  Brockton  stations,  so  that  a  reduction  of  one 
third  or  one  half  of  the  coal  rate  upon  the  coal  used  in 
Brockton  or  in  the  Brockton  group  is  a  sum  so  small  as  to 
have  no  practical  effect  upon  the  conduct  of  the  entire  busi- 
ness of  the  communities  for  which  that  coal  is  brought. 

To  see  how  unimportant  this  coal-rate  question  is  to  the 
business  of  Brockton,  it  is  only  necessary  to  apply  the  rate 
to  the  amount  of  Brockton  business.  We  do  not  know 
how  much  coal  all  the  Brockton  shoe  factories  consume, 
but  we  have  evidence  as  to  one  of  the  two  largest,  which 
may  be  fairly  taken  as  representative.  It  appears  that  the 
value  of  the  product  of  the  W.  L.  Douglas  factory  is 
about  $2,200,000  a  year,  and'  that  he  uses   1178  tons   of 


73 


coal,  at  an  average  cost  of  $5.30  a  ton   delivered   at   the 
boiler  room,  amounting  to  $6243.40. 

Testimony  E.  C.  Packard,  p.  355. 

If  the  freight  on  this  coal  were  reduced  25  cents  a  ton, 
and  the  manufacturer  received  the  entire  benefit  of  it,  his 
coal  would  cost  $5948.90,  or  $294.50  a  year  less  than  he 
now  pays.  This  reduction  would  be  only  ^3^,$^  of  1  per 
cent  on  the  value  of  his  product.  But,  to  be  exact,  we 
should  take  into  account  the  fact  that  the  manufacturer  in 
Brockton  pays  for  coal  at  2000  pounds  a  ton,  while  the 
railroad  company  transports  the  coal  at  2240  pounds  a 
ton.  The  coal  dealer  pays  the  railroad  rate  on  the  long 
ton  and  sells  to  the  manufacturer  by  the  short  ton.  The 
coal  consumption  of  Douglas  is  therefore  only  105 if  long 
tons,  and  a  reduction  of  25  cents  a  ton  in  the  freight  rate 
upon  this  would  be  $262.75,  or  onh  tf&.Vstt  °f  1  Per  cen^ 
of  the  value  of  the  product  in  the  production  of  which  the 
coal  is  used. 

It  has  appeared  that  the  payroll  of  the  Douglas  factory 
is  about  $890,000  a  year,  and  that  it  shortly  is  to  be  made, 
by  an  addition  to  the  factory,  over  $1,000,000  a  year. 
$10,000  will  doubtless  be  more  than  will  be  expended  for  coal 
in  running  the  factory  with  a  payroll  of  $1,000,000  a  year. 
It  is  obvious  that  the  price  which  the  coal  costs  in  such 
a  factory  is  absolutely  unimportant  in  the  question  of 
whether  the  factory  increases  or  does  not  increase  its 
business. 

In  fact,  the  entire  cost  of  coal  consumed  in  the  industries 
of  Brockton  is  so  small  a  portion  of  the  cost  of  production 
that  the  business  would  not  be  increased  if  the  coal  were 
furnished  for  nothing.  This  may,  perhaps,  account  for  the 
fact  that  none  of  the  large  manufacturers  of  Brockton  have 


74 


been  before  you  to  ask  for  a  change  in  rate.  I  believe  the 
fact  to  be  that  the  reduction  in  rates  which  has  been  made 
from  $i  to  75  cents  has  not  in  fact  reduced  the  price  to 
the  consumer,  but  has  been  substantially  all  a  reduction  to 
the  coal  dealers,  of  whom  Mr.  Packard,  the  only  petitioner 
who  has  been  constant  in  his  attendance  before  you,  is  the 
most  prominent.  The  price  of  coal  is,  I  believe,  fixed,  not 
only  in  Brockton,  but  in  most  cities  and  towns  of  like  char- 
acter, without  reference  to  the  cost  of  transportation,  and 
by  a  combination  between  the  dealers.  A  coal  dealer  like 
Mr.  Packard  gets  the  stated  price  for  coal  whether  he 
pays  75  cents  or  50  cents  a  ton  for  transportation  by  rail. 
He  gets  transportation  by  the  long  ton  and  sells  by  the 
short  ton,  so  that  upon  any  rate  he  makes  a  profit  of  sub- 
stantially one  fifth  of  the  rate  when  he  sells  by  the  short 
ton.  If  the  coal  dealers  paid  freight  by  the  same  ton  that 
they  sell  the  75-cent  rate  would  be  84  cents. 

The  railroad  company  in  this  case  might  have  rested 
upon  the  fact  that  the  petitioners  offered  no  evidence  what- 
ever to  show  that  the  present  rate  is  excessive  as  compared 
with  other  rates  for  similar  service  on  its  road  or  on  other 
Massachusetts  or  New  England  roads.  The  company 
had  furnished  all  the  information  as  to  its  business  for 
which  the  petitioners  asked.  It  had  answered,  at  no  small 
amount  of  labor  and  expense,  more  than  two  hundred  in- 
terrogatories carefully  prepared  by  the  petitioners,  cover- 
ing, with  the  answers,  more  than  130  pages  in  the  record 
before  you.  These  interrogatories  covered  almost  every 
phase  of  the  business  of  the  company,  and  if  I  had  not 
known  the  counsel  for  the  petitioners  I  should  have  thought 
they  were  filed  for  the  purpose  of  annoyance  rather  than 
for  information. 

When  the  petitioners  closed  their  case  absolutely  noth- 


75 


ing  had  been  shown  to  indicate  that  the  rate  complained  of 
was  in  excess  of  similar  rates  for  similar  services  in  Massa- 
chusetts or  New  England.  The  company  might  there- 
fore have  safely  rested  upon  the  weakness  of  the  peti- 
tioners' case.  But  regarding  this  case  more  in  the  light 
of  an  investigation  than  of  "a  case"  with  clearly  defined 
issues,  it  seemed  to  me  to  be  proper  for  the  company  to 
submit  to  the  board  information  with  reference  to  whether 
the  present  rate  is  excessive  as  compared  with  other  rates 
for  similar  service. 

For  that  purpose  it  seemed  to  me  that  the  best  course 
was  to  pursue  the  same  method  which  had  been  adopted 
by  the  board  itself  in  similar  cases.  I  therefore  caused 
tables  to  be  prepared  similar  to  that  which  will  be  found 
in  the  commissioners'  report  as  to  coal  rates  in  Berkshire 
county  in  1877. 

See  Comrs.  Report  1877,  p.  71. 

The  table  of  the  commissioners  in  that  case  does  not 
show  what  stations  were  selected  by  them  for  comparison. 
I  therefore  caused  tables  to  be  prepared,  which  have  been 
presented  to  you  and  are  found  on  pages  275  to  286  of  the 
report  of  this  hearing,  including  all  points  where  there  is 
any  coal  tonnage  from  tide-water  points  to  points  between 
30  and  40  miles  distant  from  tide  water.  This  zone  of  dis- 
tance, from  30  to  40  miles,  I  have  taken  because  the  dis- 
tance from  tide-water  points  from  which  coal  comes  to  the 
Brockton  stations  is  between  30  and  40  miles,  except  that 
from  Harbor  Junction  wharf  and  India  Point  the  distance 
slightly  exceeds  40  miles. 

See  answer  to  Int.  1,  Record. 
These  tables  show  the  distance  from  tide  water  to  each 


76 


point  within  the  30-  to  40-mile  zone,  the  rate  per  ton  on 
coal,  the  rate  per  ton  per  mile,  and  the  tonnage  of  coal, 
with  the  exception  of  points  on  the  Central  Vermont  Rail- 
way, where  I  have  not  been  able  to  obtain  the  exact  ton- 
nage, and  therefore  no  tonnage  is  shown.  The  tables 
also  show  the  average  distance  from  tide-water  points  to 
points  within  the  30-  to  40-mile  zone,  the  average  rate,  the 
total  tonnage  per  year  of  all  the  points,  and  the  average 
rate  per  ton  per  mile. 

On  the  Central  Vermont  Railway  there  are  five  points  in 
the  zone.  Two  of  these  have  a  75-cent  rate  and  three  a 
dollar  rate.  The  average  distance  is  39.6  miles ;  the 
average  rate  per  ton  is  90  cents ;  the  average  rate  per  ton 
per  mile  is  2.48  cents. 

On  the  Boston  &  Albany  there  are  four  points,  each 
having  a  rate  of  90  cents.  The  average  distance  to 
which  this  rate  applies  is  37.2  miles;  the  total  tonnage  is 
2597  tons  ;  the  average  rate  per  ton  per  mile  is  2.43  cents. 

On  the  Maine  Central  there  are  three  points  in  the  zone, 
one  of  which  has  a  rate  of  65  cents,  the  other  two  of  75 
cents.  The  average  distance  is  34  miles ;  the  average 
rate,  72  cents  a  ton;  the  total  tonnage,  55,126  tons;  the 
average  rate  per  ton  per  mile  is  2. 11  cents. 

On  the  Boston  &  Maine  there  are  twenty-nine  points, 
seventeen  of  which  have  a  rate  of  $1  or  more,  the  highest 
being  $1.20  per  ton.  The  average  distance  is  35.06  miles  ; 
the  average  rate  is  98  cents;  the  total  tonnage  is  280,- 
676.85  tons;  the  average  rate  per  ton  per  mile  is  2.81 
cents. 

The  tables  for  the  New  Haven  road  give  the  coal  business 
to  all  points  where  there  is  any  tonnage  between  30  and 
40  miles  distant  from  the  several  points  from  which  coal 
comes  to  Brockton  and  to  those  points,   i.e.,  from  East 


77 


Providence,   Harbor  Junction    wharf,   India   Point,   New 
Bedford,  and  Fall  River. 

The  points  supplied  from  Harbor  Junction  wharf  are 
thirty-two  in  number  ;  the  average  distance  is  34.25  miles  ; 
the  average  rate,  76  cents  per  ton ;  the  total  tonnage, 
12,752  tons ;  and  the  average  rate  per  ton  per  mile  is  2.21 
cents. 

The  points  supplied  from  India  Point  are  twenty-five  in 
number ;  the  average  distance  is  35  miles  ;  the  average 
rate,  80  cents  a  ton  ;  the  total  tonnage,  11,352  tons,  and  the 
average  rate  per  ton  per  mile  is  2.33  cents. 

The  points  supplied  in  the  30-  and  40-mile  zone  from 
New  Bedford  are  thirty-six  in  number ;  the  average  dis- 
tance is  36  miles ;  the  average  rate  is  76  cents ;  the  total 
tonnage,  70,376  tons,  and  the  average  rate  per  ton  per  mile 
is  2.15  cents. 

Twenty-nine  points  having  coal  tonnage  are  within  the 
30-  and  40-mile  zone  from  Fall  River.  The  average  dis- 
tance of  these  points  from  Fall  River  is  34  miles ;  the 
average  rate  is  80  cents  a  ton;  the  total  tonnage,  31,877 
tons  ;  and  the  average  rate  per  ton  per  mile  is  2.34  cents. 

The  result  of  this  examination  is  as  follows  :  — 

The  Central  Vermont  Railway,  on  an  average  distance 
from  New  London  to  points  within  the  30-  and  40-mile 
zone  of  39.6  miles,  has  an  average  rate  on  coal  of  90  cents 
a  ton. 

The  Boston  &  Albany,  on  an  average  distance  from 
East  Boston  of  37.2,  has  an  average  rate  of  90  cents. 

The  Maine  Central,  on  an  average  distance  of  34  miles 
from  Portland,  has  an  average  rate  of  72  cents. 

The  Boston  &  Maine  Railroad,  on  an  average  distance 
of  35.06  from  Mystic  wharf,  has  an  average  rate  of  98 
cents. 


78 


The  New  Haven  Railroad,  on  an  average  distance 
within  the  30  and  40-  miles  zone  from  all  five  points  at 
tide  water  of  34.95  miles,  has  an  average  rate  of  78.4  cents 
per  ton  per  mile. 

It  thus  appears  that  the  75-cent  rate  to  Brockton  is  3.4 
cents  per  ton  less  than  the  average  rate  for  similar  trans- 
portation of  coal  from  tide  water  by  the  New  Haven  road 
in  Massachusetts. 

It  also  appears  that  the  Brockton  rate  is  very  much  less 
than  the  rate  on  other  New  England  roads  for  similar  ser- 
vice, with  the  exception  of  the  Maine  Central,  where  the 
rate  from  Portland  for  34  miles  is  72  cents,  and  the 
revenue  per  ton  mile  is  75  cents,  which  is  exactly  the 
Brockton  rate. 

To  recapitulate  :  The  New  Haven  carries  coal  from  30 
to  41  miles,  according  to  the  point  of  departure,  to  Brock- 
ton at  75  cents  a  ton,  while  the  Central  Vermont  and  the 
Boston  &  Albany,  for  a  similar  service,  charge  90  cents  a 
ton,  and  the  Boston  &  Maine  charges  98  cents  a  ton. 

It  thus  clearly  appears  that,  to  use  the  language  of  the 
commissioners  in  cases  previously  referred  to  in  this  argu- 
ment, the  Brockton  rate  "  is  not  excessive  as  compared 
with  the  general  rates  charged  on  other  roads,"  and  that  the 
Brockton  coal  rate  is  not  in  excess  of  the  average  charge 
for  similar  service  to  other  points  on  the  New  Haven  rail- 
road, and  on  other  Massachusetts  and  New  England 
roads. 

But  it  should  also  be  borne  in  mind  in  this  connection 
that  Brockton  is  not  a  competitive  point,  and  therefore  its 
rates  cannot,  as  this  Board  have  frequently  said  in  similar 
cases,  be  properly  compared  with  the  rates  of  competitive 
points.  In  these  tables,  however,  I  have  included  all 
points  within  the  30-  and  40-mile  zones  on  the  various  roads, 


79 


whether  competitive  or  non-competitive.  If  only  the  ratal 
to  the  non-competitive  points  like  Brockton  had  been  taken 
for  this  comparison  it  would  appear  unquestionably  that 
the  Brockton  rate  is  very  much  less  than  the  average  rate 
for  similar  service  to  non-competitive  points  on  the  New 
Haven  Railroad,  and  on  other  roads  in  New  England. 

In  this  connection,  see  Exhibit  7,  or  compara- 
tive statement  of  actual  rates  to  competitive 
and  non-competitive  points,  p.  301,  Sten. 
Rep. 

In  this  table  the  difference  between  competitive  and 
non-competitive  rates  is  indicated.  For  instance,  on  the 
Boston  &  Maine  the  distance  from  Mystic  wharf  to  Clin- 
ton, which  is  a  competitive  point  with  the  New  Haven 
railroad,  is  49  miles,  and  the  rate  on  coal  is  $1,  while  from 
Mystic  wharf,  48  miles,  to  Merrimac,  a  non-competitive 
point,  the  rate  is  $1.25,  and  from  Mystic  to  Exeter,  a  non- 
competitive point,  52  miles,  the  rate  is  $1.30. 

On  the  Fitchburg,  from  Boston  to  Fitchburg,  50  miles, 
competitive  with  the  New  Haven,  the  rate  is  $1  a  ton,  while 
to  West  Townsend,  48  miles,  non-competitive,  the  rate  is- 
$1.25  ;  and  the  rate  for  60  miles  to  Milford,  a  point  com- 
petitive with  the  Boston  and  Maine,  is  $1.10,  while  for  the 
same  distance  to  South  Ashburnham,  non-competitive,  the 
rate  is  $1.50  a  ton. 

On  the  Albany  road  the  rate  for  196  miles,  from  East 
Albany  to  Allston,  competitive  with  water  transportation, 
is  $1.05,  while  the  rate  to  North  Wilbraham,  a  non-com- 
petitive point,  is  $1.25  for  111  miles.  The  rate  from  East 
Albany  to  Worcester,  156  miles,  competitive  with  the  Bos- 
ton &  Maine,  the  Fitchburg,  and  New  Haven   is  $1.25, 


80 


while  the  rate  to  Templeton,  155  miles,  non-competitive,  is 
$1.45. 

On  the  New  York  Central  we  find  the  same  conditions. 
The  rate  from  New  York  to  Hyde  Park,  78  miles,  com- 
petitive with  water  transportation,  is  80  cents,  while  the 
rate  from  Port  Morris  to  Wassaic,  the  same  distance,  non- 
competitive, is  $1.25.  The  rate  from  Rochester  to 
Geneva,  51  miles,  competitive  with  the  Lehigh  Valley  road, 
is  73  cents,  while  the  rate  from  Rochester  to  Clarence  for 
the  same  distance,  non-competitive,  is  84  cents. 

On  the  New  Haven  road  the  rate  from  tide  water  to 
Worcester,  44  miles,  competitive  with  the  Boston  &  Al- 
bany, the  Fitchburg,  and  the  Boston  &  Maine,  is  75  cents, 
while  the  rate  to  Quincy  Adams  for  the  same  distance,  non- 
competitive, is  90  cents.  The  rate  from  tide  water  to 
Fitchburg,  90  miles,  competitive  with  the  Fitchburg  Rail- 
road, is  90  cents,  while  the  rate  to  South  Wellfleet  for  the 
same  distance,  non-competitive,  is  $1.50.  The  rate  from 
tide  water  to  Concord  Junction,  52  miles,  competitive  with 
the  Boston  &  Maine,  is  90  cents,  while  the  rate  from  tide 
water  to  Mattapoisett,  the  same  distance,  non-competitive, 
is  $1.10. 

If  the  Brockton  rate  is  compared  with  rates  of  the  same 
distance  to  like  non-competitive  points,  it  will  be  found 
that  the  present  rate  of  75  cents  is  very  much  below  the 
average  rate  to  similar  non-competitive  local  points. 

See  also,  to  the  same  effect,  tables  of  rates  to 
competitive  points  on  the  New  York  Central, 
as  compared  with  rates  on  the  same  road  to 
non-competitive  points  situated  like  Brockton, 
Middleborough,  etc.,  and  tables  as  to  the 
same  rates  on  the  Lake  Shore  &  Michigan 


M 


Southern   Railroad.      Sten.    Rep.    pp.    305, 
306,  307. 

It  seemed  to  me  also  helpful  upon  this  branch  of  the  dis- 
cussion to  ascertain  how  the  coal  rates  from  tide  water  on 
the  New  Haven  for  different  zones  of  distance  compare  with 
the  rates  on  other  roads  for  similar  zones  of  distance.  For 
this  purpose  a  table  was  prepared,  which  is  found  on  pages 
289  to  290  of  the  record,  showing  the  rates  for  zones  from 
5  miles  to  115  miles,  each  zone  being  5  miles  greater  dis- 
tance than  the  preceding  zone,  on  the  New  Haven,  Fitch- 
burg,  Boston  &  Maine,  and  New  York  Central  roads. 
This  table  shows  that  the  New  Haven  coal  rate  for  similar 
zones  is  less  than  on  the  other  roads.  For  instance,  in  the 
20-mile  zone  the  rate  on  the  New  Haven  from  New  Bed- 
ford to  Taunton  is  50  cents,  from  Fall  River  to  New  Bed. 
ford  60  cents,  from  East  Providence  to  Taunton  50  cents. 

On  the  Boston  &  Maine,  in  the  same  20-mile  zone,  the 
rate  from  Boston  to  Concord  is  70  cents,  and  from  Boston 
to  Tapleyville  75  cents. 

And  on  the  New  York  Central  the  rate  for  the  same 
distance  from  New  York  to  Dobbs'  Ferry  is  50  cents,  from 
Port  Morris  to  White  Plains  90  cents,  and  from  Chatham 
to  Hillsdale  60  cents. 

In  the  10-mile  zone  it  will  be  found  that  the  Fitchburg 
rate  from  Boston  to  Waltham  is  60  cents,  while  the  New 
Haven  rate  from  Fall  River  to  North  Dighton,  East  Prov- 
idence to  Attleborough,  and  New  Bedford  to  East  Free- 
town for  the  same  distance  is  50  cents. 

Other  illustrations  can  be  taken  from  the  tables,  and  while 
they  are  not  controlling  without  the  tonnage  I  am  confident 
that,  tested  by  any  method  of  examination,  it  will  be  found 
that  the  present  Brockton  coal  rate  is  at  least  as  low  as,  and, 


82 


I  think,  lower  than,  the  average  coal  rate  for  similar  service 
on  the  New  Haven  road.  It  will  also  be  found,  I  believe, 
that  the  average  New  Haven  local  coal  rate  is  lower  than 
the  rate  for  the  same  service  on  other  New  England  roads, 
or  on  the  New  York  Central  and  other  roads  of  the  middle 
states. 

In  this  connection,  I  desire  to  call  attention  to  the  reduc- 
tion in  coal  rates  on  the  lines  controlled  by  the  New  Haven 
road  between  the  points  which  were  selected  by  the  com- 
missioners in  1887,  as  proper  standards  for  comparison 
with  other  coal  rates. 

Commissioners'  Report,  1887,  p.  80. 

For  that  purpose  the  following  table  has  been  prepared. 
It  is  a  copy  of  the  table  in  the  commissioners'  report,  with 
the  addition  of  columns  showing  the  present  management 
of  the  lines,  over  which  the  rates  existed,  the  present  rates, 
and  the  decrease  in  rates.  There  are  21  rates  in  this  table, 
12  on  lines  now  controlled  by  the  New  Haven  Company, 
and  9  on  .lines  now  controlled  by  the  Boston  &  Maine. 
The  rates  in  1886  were  for  cargo  lots.  Some  of  them,  as 
the  table  indicates,  were  for  net  tons  of  2000  pounds.  The 
rates  for  1900  are  all  for  gross  tons,  2240  pounds,  and  are, 
on  the  New  Haven  road,  all  for  carload  lots.  In  one 
case,  from  Boston  to  Stoughton,  there  has  been  an  increase 
of  10  cents  a  ton,  caused  by  eliminating  half  cents  per  hun- 
dred pounds  in  the  tariff.  On  the  lines  controlled  by  the 
Boston  &  Maine  there  has  been  only  one  decrease  of  10 
cents,  from  Worcester  to  Hubbardston,  where  the  rate  has 
been  reduced  from  $1  to  90  cents  for  20  miles  ;  but  on 
the  New  Haven  there  has  been  a  decrease  in  7  out  of  the 
12   rates,  this   decrease  varving   from    10  cents    between 


83 


South  Framingham  and  Carlisle  to  35  cents  between  Bos- 
ton and  Walpole. 


Comparative  Statement  of  Coal  Rates  i 886-1 900. 


Present 
Management. 

Railroad. 

From. 

To. 

1 

u 
1 
M 

n 

Dec. 

r 

B.  &L. 

Boston 
(Mystic  whf.) 

E.  Billerica 

'9 

$075 

$0  75 

11 

Billerica 

21 

75 

75 

" 

N.  Billerica 

22 

1 

11 

B.  &  M.  R.R. 

B.  &  M. 

Boston 

Ballardvale 

21 

" 

Andover 

23 

85 

Bj 

11 

Lawrence 

26 

Bs 

85 

" 

Lowell 

28 

8 

85 

N.Y..N.H.&  H. 

B.  &P. 

India  Point 
(Providence) 

E.  Foxboro 

JO  | 

*I  10 

85 

25 

Boston 

E.  Foxboro 

2li 

*I  10 

80 

3° 

B.  &  M.  R.R. 

Fitchburg 

Boston 

Concord 

20 

75 

75 

Worcester 

Hubbardston 

20 

i  00 

90 

10 

N.Y..N.H.&H 

N.Y.  &  N.E. 

Boston 

Walpole 

'9 

•1  00 

65 

35 

«« 

Norfolk 

23 

*i  20 

1  00 

20 

Providence 

Coventry 

18 

*i  00 

1  00 

N.Y..N.H.&  H 

Old  Colony 

Somerset 

Mansfield 

20 

75 

'   75 

•« 

Easton 

20 

1  00 

U 

25 

Boston 

Brockton 

20 

80 

M 

Stoughton 

19 

90 

1  00 

10  inc. 

ct 

Cohasset 

22 

1  00 

1  00 

Walpole 

Southboro 

19 

1  00 

75 

25 

South  Fram. 

Carlisle 

20 

1  00 

90 

.0 

»  Net  ton. 

With  reference  to  the  claim  sometimes  made  that  New 
England  local  coal  rates  are  higher  than  the  local  coal 
rates  in  other  states,  I  call  the  attention  of  the  board  to  a 
table,  which  is  Exhibit  6,  on  page  299  of  the  stenographic 
report,  showing  the  rates  for  non-competitive  local  coal 
business  on  the  Philadelphia  &  Reading  Railroad.  These 
rates  are  very  much  higher  than  rates  for  similar  service  in 
New  England. 

It  has  been  claimed  by  the  petitioners  that  the  Brockton 
coal  rate  should  be  upon  a  mileage  basis,  and  they  brought 


84 


before  you  a  so-called  expert  in  transportation,  who,  as  the 
result  of  a  computation  made  by  him  as  to  the  cost  of 
transportation  of  coal,  claimed  that  the  proper  rate  for  the 
transportation  of  coal  was  1.56  cents  per  ton  mile,  which 
makes  practically  a  50-cent  rate  to  Brockton.  This  wit- 
ness claimed  that  50  cents  a  ton  was  a  proper  rate  to 
Brockton,  because  1.56  cents  j>er  ton  mile  was  a  proper 
rate  for  hauling  coal,  and  that  rate,  applied  to  the  distance 
from  tide  water  to  Brockton,  would  produce  a  50  cents  a  ton 
rate.  He  was  frank  enough  to  admit  that  if  Brockton  was 
to  have  a  rate  fixed  upon  a  mileage  basis  every  other  place 
should  have  a  rate  also. 

To  ascertain  how  this  method  of  fixing  the  rate  for  the 
transportation  of  coal  would  affect  coal  rates,  I  caused  a 
table  to  be  prepared  showing  how  the  rates  would  be 
changed  by  the  application  of  this  method  to  the  points  in 
the  Brockton  group,  and  also  to  various  other  points  on  the 
New  Haven  and  other  roads  in  New  England.  It  is  Ex- 
hibit 11,  found  on  pages  313  to  319  of  the  stenographic 
report.  An  examination  of  it  shows  the  absolute  impossi- 
bility of  fixing  rates  upon  any  basis  of  cost  of  transportation 
per  mile  even  if  the  cost  could  be  ascertained.  It  would 
introduce  an  absolute  diversity  of  rates  into  groups  of 
cities  and  towns  doing  business  under  substantially  the 
same  conditions,  and  which  ought  to  have  for  all  practical 
business  purposes,  and  which  do  have,  practically  uni- 
form  rates. 

For  example,  the  rates  from  New  Bedford  would  be 
31  cents  per  ton  to  Campello,  33  cents  per  ton  to  Brock- 
ton, and  36  cents  per  ton  to  Montello  ;  and  the  rates  from 
Providence  would  be  63  cents  per  ton  to  Campello,  66 
cents  per  ton  to  Brockton,  and  69  cents  per  ton  to  Montello. 
And  the  Brockton   group,  instead  of  being  uniformly  75 


85 


cents  per  ton  from  all  water  ports  would  vary  from  j/ 
cents  per  ton,  Fall  River  to  Titicut,  to  $1.17  per  ton,  New 
Bedford  to  Island  Creek. 

A  tariff  for  coal  or  any  other  commodity  based  upon 
distance  or  upon  cost  per  mile  would  restrict  the  trans- 
portation by  rail  to  comparatively  limited  areas.  If  such 
a  method  were  applied  to  the  railroad  tariffs  of  the  whole 
railroad  system  of  the  country,  railroads  would  cease  to  be 
of  any  practical  benefit  to  the  business  of  the  country.  It 
is  absolutely  impossible  for  the  different  industries  to  pay 
for  their  transportation  in  proportion  to  the  distance  or  to 
the  cost  of  the  transportation. 

In  considering  the  question  of  local  freight  rates  in 
Massachusetts,  it  is  important  to  ascertain  the  manner  in 
which  the  business  is  required  to  be  done.  Railroad  trans- 
portation is  not  a  mere  matter  of  applying  power  to  trains 
of  cars  and  hauling  them  longer  or  shorter  distances.  It 
involves  many  other,  and,  in  some  cases,  much  more  im- 
portant elements.  I  have  therefore  thought  it  proper  to 
show  to  you  how  the  coal  business  to  Brockton  is  necessa- 
rily done  by  the  railroad  company.  The  petitioners  seem 
to  assume  that  the  coal  transportation  from  tide  water  to 
Brockton  is  a  mere  matter  of  hauling  trains  of  coal  cars 
without  taking  into  account,  as  far  as  I  remember,  even  the 
matter  of  returning  the  empty  cars.  As  a  matter  of  fact 
we  find  that  the  coal  business  to  Brockton  and  to  other  in- 
terior local  points  on  the  New  Haven  road  is  done  by  local 
freight  trains,  and  in  a  comparatively  small  number  of  cars 
in  each  train.  There  is  no  "cargo  business"  to  Brockton 
or  any  point  in  the  Brockton  group.  There  are  no  "coal 
trains,"  as  such.  Coal  business  is  done  by  local  freight 
trains.  The  freight  trains  by  which  coal  is  brought  from 
East  Providence  to  Montello  make  nineteen   local  stops ; 


86 


the  trains  bringing  coal  from  New  Bedford  to  Montello 
make  fourteen  local  stops,  and  the  trains  bringing  coal  from 
Fall  River  to  Montello  make  thirteen  local  stops.  The 
same  number  of  stops  for  local  business  are  made  by  the 
trains  bringing  coal  from  these  points  either  to  Campello  or 
Brockton. 

See  Tables,  pp.  333,  354,  Sten.  Rep. 

The  cars  in  which  the  coal  for  Brockton  stations  comes 
are  also  most  of  them  switched  at  two  or  three  connections 
from  one  train  to  another  on  the  route.  For  instance, 
coal  cars  from  East  Providence  to  Brockton  are  taken  by- 
local  freight  trains  to  Attleborough,  and  there  left.  They 
are  then  switched  into  trains  that  run  to  Middleborough, 
and  there  left.  They  are  then  switched  into  trains  that  run 
to  Brockton.  The  same  is  true  of  coal  coming  from  Fall 
River  or  New  Bedford. 

See  Answers  to  Interrogatories  34  et  seq. 

The  average  number  of  coal  cars  in  these  local  freight 
trains  is  probably  not  more  than  seven  or  eight  to  a  train. 
The  difference  in  the  expense  of  transporting  coal  in  this 
way  by  local  freight  trains  at  retail,  as  the  necessities  of 
customers  may  require,  and  transporting  it  in  solid  train 
loads,  as  is  done  between  Mystic  and  Lowell,  and  to  some 
extent  between  tide  water  and  Worcester,  is  obvious.  But 
this  is  a  matter  over  which  the  railroad  company  has  no 
control.  It  must  take  the  coal  as  it  is  offered  it  at  tide 
water,  and  it  is  offered  to  it  at  tide  water  precisely  as  the 
necessities  of  the  coal  dealers'  business  demand. 

Coal  comes  to  tide  water  either  consigned  to  agents  of 
the  coal  companies,  who  direct  its  distribution  from  the 
vessel  itself,  as  at  East  Providence  wharf,  or  to  agents  who 


87 


have  capacity  to  store  the  coal,  ami   therefore   take   it   into 
their  own  coal  pockets,  and  then   direct   its   distribution   by 
rail  at  their  own  convenience.     In  either  case,  the  railroad 
company  is  obliged  to  take  the  coal  as  it  is  offered  to  them 
by  the  agents,  and   the   agents  offer  it  to  the   railroad  as 
the  requirements  of  their  business,  that  is,  of  their  retail 
customers  all  over  the   territory  reached   by  the   railroad, 
may  require.     When  the  coal  is  shipped  from  the  vessel, 
as  at  East  Providence  wharf,  the  agent  to  whom  the  cargo 
is  consigned  gives  to  the   railroad  company,  at  or  shortly 
before  the  arrival  of  the  cargo,  an  order  for  its  distribution 
to  the  customers  to  whom  it  has  been   sold  by  the   agent. 
This  order  is  called  a."  distribution  sheet,"  and  in  order  that 
you  might  see  precisely  how  the  business  is  done,  a  con- 
siderable number  of  these  sheets  have  been  produced  before 
you.     A  summary  of  some  of  them  will  be  found  in  the  sten- 
ographic report,  pages  326  to  328.     In  many  cases  it  ap- 
pears that  not  more  than  two  or  three  cars  are  on  the  aver- 
age sent  to  each  consignee.     In  one  case  a  cargo  went  by 
43   cars  to   24  different  consignees,  and  this  cargo  con- 
sisted of  three  kinds  of  coal  discharged  separately  at  differ- 
ent times. 

Where  the  coal  comes  to  agents  having  their  own  stor- 
age pockets,  as  is  the  case  with  the  Staples  Coal  Company 
at  Fall  River,  and  the  Garfield  &  Proctor  and  the  Phila- 
delphia &  Reading  Coal  companies  at  New  Bedford,  it  is 
offered  to  the  railroad  for  transportation  in  the  same  irregu- 
lar way,  that  is,  to  meet  the  convenience  of  the  consign- 
ees, to  whom  these  companies  sell  the  coal.  The  railroad 
company  takes  it  from  the  coal  companies'  coal  pockets 
just  as  an  expressman  takes  goods  from  a  merchant  to  dis- 
tribute to  his  patrons,  i.e.,  as  the  customers  desire  to  have 
it  taken. 


88 


The  shipments  of  the  Staples  Coal  Company  for  two 
days  in  November  and  October  last  have  been  shown  to 
you  from  the  record  books,  which  show  that  on  November 
21,  20  cars  were  sent  to  10  different  consignees,  and 
October  13,  25  cars  were  sent  to  10  different  consignees, 
being  an  average  of  about  two  to  two  and  a  half  cars  to 
each  consignee. 

You  also  have  before  you  the  record  of  shipment  of 
coal  from  New  Bedford  and  from  Fall  River  by  the  Phil- 
adelphia &  Reading,  and  Garfield  &  Proctor  companies. 
These  are  to  be  found  on  pages  339  to  344,  stenographic 
report.  It  will  appear  from  this  that  while  in  some  cases 
91  cars  to  15  different  consignees  have  gone  out  in  one 
single  day,  in  other  cases  22  cars  have  gone  out  to  7  con- 
signees in  a  day,  and  46  to  13  different  consignees  in  a 
day.  On  September  28  last  the  record  shows  that  64 
cars  were  sent  to  22  different  consignees,  and  on  the  29th 
of  September  60  cars  were  sent  to  18  different  consignees. 

The  statement  of  Mr.  Sherwin,  the  sales  agent  of  the 
Reading  Company,  shows  the  shipments  by  that  company 
from  New  Bedford,  from  November  7  to  November  26, 
1900.  From  this  it  appears  that  while  on  February  7,  300 
tons  were  distributed  among  5  different  parties,  on  No- 
vember 9,  40  tons  were  distributed  to  2  different  parties, 
and  on  the  21st  100  tons  were  distributed  to  6  different 
consignees.  This  table  shows  not  only  in  what  small  lots 
the  coal  is  offered  to  the  railroad  company,  but  also  the 
fluctuating  character  of  the  transportation.  For  instance, 
on  the  15th  of  November  only  40  tons  were  delivered  to 
the  railroad,  while  on  the  19th  700  tons  were  delivered, 
300  for  one  consignee  and  the  balance  for  11  different  con- 
signees. The  fluctuating  character  of  the  business  causes 
difficulties  in  transportation  which  are  obvious.     When  a 


89 


large  quantity  is  sent  out  in  a  day  the  can  accumulate  at 
junctions  and  have  to  be  handled,  and  this  causes  more  or 
less  delay.  Illustrations  of  these  delays  will  be  found  in 
the  testimony  on  page  346. 

The  fluctuating  character  of  the  business  also  renders  it 
difficult  to  provide  cars,  especially  because  coal  cars  do 
not  load  back  to  tide  water,  but  must  go  back  as  empties. 
In  this  connection  a  statement  has  been  put  in  before  you 
which  will  be  found  on  page  332  of  the  stenographic  re- 
port, showing  coal  on  hand  at  tide-water  points,  October 
1  to  November  1,  1900.  Examination  of  this  shows  that 
while  on  October  3  there  were  44,527  tons  on  hand,  on 
the  same  day  in  November  there  were  only  15,825  tons  on 
hand,  and  on  November  8  there  were  only  12,627  tons  on 
hand  at  tide  water,  and  66j  empty  coal  cars  were  stored 
waiting  coal  to  be  offered  to  the  railroad  for  transpor- 
tation. 

As  bearing  upon  the  question  of  whether  you  should 
interfere  with  the  present  rate  I  desire  to  call  your  attention 
to  the  circumstances  under  which  this  rate  was  fixed.  It 
was  fixed  only  two  years  ago,  and  by  agreement  of  the 
petitioners  and  the  company.  This  agreement  was  the 
result  of  an  investigation  lasting  nearly  a  year  before  this 
board,  and  of  ample  negotiation  and  fair  discussion  be- 
tween the  petitioners  and  the  representatives  of  the  com- 
pany. The  rate  then  fixed  by  that  agreement  was  more 
than  11  per  cent  less  than  the  rate  of  85  cents  then  exist- 
ing, and  it  was  25  per  cent  less  than  the  rate  which  had 
existed  for  many  years  before  the  agreement  was  made. 
It  is  a  rate  which  the  counsel  for  the  petitioners,  and  who 
now  appears  for  them,  stated  to  the  board,  when  it  was  made 
in  1899,  was  "to  the  satisfaction  of  the  Brockton  people." 


90 


It  is  a  rate  which,  the  counsel  for  the  petitioners  stated  to 
the  board  when  it  was  agreed  to,  " generously  gave  to  us" 
(i.e.,  the  petitioners)  "substantially  what  we  asked  with 
regard  particularly  to  the  coal  rate."  Of  course  it  is  not 
a  rate  which  can  never  be  changed.  All  rates  are  subject 
to  change,  but  I  submit  it  is  a  rate  fixed  under  such  cir- 
cumstances, by  such  processes,  and  by  such  an  agreement 
of  all  parties  interested,  that  it  ought  to  stand  until  such  a 
change  in  conditions  is  shown  as  to  make  it  clearly  appear 
that  it  ought  to  be  changed. 

Suppose  the  question  was  whether  the  company  ought 
now  to  increase  the  rate.  Would  not  the  petitioners  say 
at  once  that  to  justify  an  increase  of  a  rate  thus  fixed  by 
agreement  a  change  in  conditions  should  be  clearly  shown? 
But  there  is  no  claim,  much  less  any  proof,  before  you  that 
conditions  have  so  changed  as  to  call  for  a  reduction  of  this 
rate.  On  the  contrary,  everybody  knows  that  all  changes 
which  have  occurred  since  this  rate  was  agreed  upon  have 
been  in  the  direction  of  an  increased  expense  by  the  com- 
pany, and  therefore  of  an  increased  rate.  All  materials  are 
higher,  labor  is  higher,  taxes  are  higher,  everything  that 
enters  into  the  cost  of  transportation  is  more  expensive 
than  when  the  rate  was  fixed. 

In  conclusion,  allow  me,  as  bearing  on  this  and  other 
similar  questions,  to  call  your  attention  to  what  the  New 
Haven  Company  has  done  for  the  public  service  in  Massa- 
chusetts since  it  leased  the  Old  Colony  Railroad  nearly 
eight  years  ago. 

It  at  once  removed  the  Old  Colony  local  rate,  or  arbi- 
trary, from  the  business  of  the  Old  Colony  lines.  This 
amounted  to  at  least  $150,000  a  year  reduction  in  the  rates 
paid  by  the  business  served  by  those  lines,  or  not  less  than 
$i,20Q,ooq  during  the  eight  years  since  the  lease. 


91 


It  has  also,  during  this  time,  expended  more  than  $7,- 
000,000  in  the  abolition  of  grade  crossings  in  Massachu- 
setts alone,  and  its  expenses  for  similar  work  now  ordered 
by  the  legislature  in  Massachusetts  will  be  more  than 
$1,500,000. 

It  has  assumed  a  large  part,  perhaps  four  fifths,  of  the 
cost  of  the  construction  of  the  South  Union  station  in  Bos- 
ton, the  cost  of  which  has  been  nearly  $15,000,000. 

It  has  expended  nearly  $4,500,000  in  the  Dartmouth- 
street  station  and  the  extension  of  the  Providence  road  to 
the  South  Union  station  in  Boston,  and  there  are  still  large 
unsettled  claims  for  which  it  is  liable  on  that  account. 

It  has  expended  nearly  $1,000,000  for  land  in  Boston 
outside  of  expenses  of  land  for  abolition  of  grade  crossings 
and  for  the  extension  of  the  Providence  road. 

It  is  safe  to  say  that  these  expenses  amount  to  at  least 
$25,000,000. 

In  addition  to  this  there  are  proceedings  pending  for  the 
abolition  of  other  grade  crossings,  like  those  in  New  Bed- 
ford, in  Attleborough,  in  Taunton,  in  Walpole,  and  on 
Dudley  street  in  Boston.  If  these  proceedings  result  in 
requiring  the  abolition  of  the  crossings  asked  for  in  them 
several  million  dollars  more  will  require  to  be  expended 
by  the  company  in  Massachusetts  in  this  manner. 

It  should  also  be  remembered  that  in  addition  to  this  the 
company  has  been  required,  for  the  improvement  of  the 
line  between  Boston  and  New  York,  to  make,  and  is  mak- 
ing, large  expenses  on  portions  of  its  line  outside  of  Mas- 
sachusetts, as  in  the  city  of  Providence  alone  over  $2,500,- 
000,  and  in  Bridgeport  nearly  $3,000,000. 

The  dividends  to  the  stockholders  have  been  decreased 
in  connection  with  these  expenses,  so  that  since  July   1, 


92 


1893*  they  have  received  20  per  cent  less  income  than  they 
had  received  previous  to  that  time  for  many  years. 

Most  of  these  expenses  in  Massachusetts  have  been  re- 
quired by  the  legislature  to  be  made,  and  they  have  all 
been  thought  to  be  demanded  for  the  accommodation  of 
the  public.  How  far  the  increase  of  business  or  economy 
of  operation  will  show  them  to  have  been  financially  for 
the  interests  of  the  shareholders  of  the  company  it  is  im- 
possible to  tell.  Certain  it  is,  however,  that  as  between 
the  shareholders  and  the  public  there  have  been  enormous 
expenses  for  the  accommodation  of  the  public,  a  general 
decrease  of  the  charges  to  the  public  for  that  accommoda- 
tion, and  a  reduction  of  one  fifth  of  the  revenue  received 
from  the  public  by  the  shareholders  for  the  use  of  their 
property. 


14  DAY  USE 

RETURN  TO  DESK  FROM  WHICH  BORROWED 
LOAN  DEPT. 

This  book  is  due  on  the  last  date  stamped  below  or 
on  the  date  to  which  renewed  ' 

Renewed  books  are  subject  to  immediate  recall 


— MA¥L^3 — »59— 


LD  21A-50m-9,'58 

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.General  Library 

L  niversity  of  Calif ornis 

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